As you will still need money to live comfortably, a pension pays you a regular income during your retirement years. If you’ve made enough Pay-Related Social Insurance (PRSI) contributions during your working life, the state will pay you a pension after the age of 66. But this needn’t be your only source of money. You can also pay into a fund regularly during your working life to build what’s known as a ‘pension pot’. Over the years, your regular payments are invested to generate returns which allow your pension pot to grow in value. When you retire, you can decide how you want to use this money.

Why is a pension important?

By saving for a pension while you work, you’re investing in yourself. After all, you’ll still need an income to cover everyday expenses, plus costs such as healthcare, insurance and home maintenance. You’ll also want to enjoy all the free time you’ll have available – and money will be needed for this too. So to stay comfortable, independent and financially secure when you retire, a pension is essential.

When is the right time to start a pension?

In a nutshell, the earlier you start investing for your retirement the better. That’s because you’ll give the money you invest a better chance to benefit from long-term growth. Starting to invest early also means you could take occasional breaks in saving without affecting the size of your pension pot too much. Saying all that, starting a pension can make sense at any time. Whatever age you are, an Ask Acorn financial advisor can explain everything you need to know about starting the right pension for you.

What kind of pension do I need?

Your needs and appetite for financial risk are completely personal to you – and so is your choice of pension. It all depends on your personal circumstances. For example, you should take any pension options offered by your employer into account. Also, consider what would happen if you ever move jobs. If this is a possibility, or if there’s a chance you may have spells of self-employment, a Personal Retirement Savings Account (PRSA) could be an ideal solution. Your Ask Acorn financial advisor will give you all the help you need to identify the pension solution that fits your needs and goals.

Do I get tax relief on pension contributions?

The government wants everyone to save for retirement – and that’s the simple reason why it gives tax relief, up to certain limits, on your annual pension contributions. An Ask Acorn financial advisor can help you understand any tax benefits associated with investing for your retirement.

How much will I need to live on when I retire?

No one else can answer this question except you. To identify how much you might need, start by calculating your current average outgoings. Then subtract any costs that may not apply when you retire. Childcare costs and mortgage payments are the most obvious examples but of course, this all depends on your own situation. It’s also wise to make an allowance for unexpected costs. You’ll also need to take inflation into account. By the time you stop working, most things will probably have risen in price, and prices will keep climbing during your retirement. By chatting with an Ask Acorn financial advisor, you’ll benefit from our expert professional knowledge and we’ll be with you at every step to help ensure a comfortable, secure retirement.

Can I draw my pension early?

There’s usually a minimum age before you can benefit from your retirement savings. However, it’s sometimes possible to draw a pension early – for example, if you experience ill health, redundancy or other particular situations. However, making early withdrawals can mean you would receive a lower level of benefits than if you had waited longer. This is simply because you’ll have made fewer contributions and these will have been invested for a shorter time. If you think you may want to draw your pension early, talk to an Ask Acorn financial advisor who will explain all your options.

Should I choose an ARF or an annuity?

If you’ve been saving for retirement, you will have built up a pension pot. Approved Retirement Funds (ARFs) and annuities are the two ways you can benefit from the money in this pot. When you retire, you can select which of these best suits your needs; alternatively, you can choose a mix of both. To help you decide, here’s a brief outline of the two options: An Approved Retirement Fund (ARF) lets you manage and invest the funds in your pension pot where and how you wish. This means you’ll experience the market’s ups and occasional downs. There’s also the possibility that your fund might eventually run dry. However, if you want to retain control and flexibility over your retirement savings, an ARF will give you both. An annuity will pay you a risk-free income for life or for a specified period. This gives you stability, you don’t face any market-related risks and you won’t have to make investment decisions in the future. If you wish, you can split your retirement savings between an ARF and an annuity. Of course, doing this can reduce the amount that either option will pay you. Choosing between an ARF and an annuity is an important decision. So it’s worth talking to an Ask Acorn financial advisor to learn about your options before you make any decisions.

What happens to my pension if I die before I retire?

This depends on your specific pension. Different pension types have different rules about what happens if you die before you retire. So you should always chat with an Ask Acorn financial advisor to check what applies to you. One important point to note is that you need to specify who will benefit from your pension’s value if you die before you retire.