Private Clients
Pensions
Why should you have a Private Pension?
A private pension (such as a PRSA, personal pension, or employer-sponsored scheme) helps you save for retirement independently of the State Pension, ensuring greater financial security when you stop working.
Here’s why having one is important:
1. The State Pension May Not Be Enough
The State Pension (Contributory) is currently €277.30 per week (as of 2024).
This equates to around €14,420 per year, which may not be enough to maintain your standard of living.
2. tax Relief on Contributions
Contributions to a private pension are tax-deductible, meaning you get back up to:
20% tax relief if on the standard rate.
40% tax relief if on the higher rate.
This makes it one of the most tax-efficient ways to save.
3. Tax-Free Lump Sum at Retirement
You can take up to 25% of your pension fund as a tax-free lump sum, subject to a €200,000 limit.
The next €300,000 is taxed at 20%, with anything above taxed at your marginal rate.
4. No Tax on Investment Growth
Pension funds are exempt from capital gains tax (CGT) and DIRT (Deposit Interest Retention Tax).
Any growth from stocks, bonds, property, or other investments within your pension is tax-free.
Dividends, interest, and capital gains earned inside the pension are reinvested without tax deductions.
This allows for compound growth, helping your pension grow faster over time.
5. employer Contributions (If Available)
If your employer offers a company pension, they may match or contribute to your pension fund, boosting your savings significantly.
This is essentially free money for your retirement.
6. financial Independence in Retirement
Relying solely on the State Pension may mean a lower standard of living.
A private pension provides a higher income, allowing for a more comfortable retirement.
7. Flexible Retirement Options
At retirement, you can:
Take a lump sum.
Use the rest to buy an Annuity (a guaranteed income for life).
Transfer to an Approved Retirement Fund (ARF) for flexible withdrawals.
8. Early Retirement Possibilities
Some private pensions allow access from age 50 (occupational schemes) or age 60 (PRSAs & personal pensions).
This offers more freedom and flexibility in your later years.