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Your 30-something pension checklist and essential how to guide

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18 Oct 2017

Posted in:  Financial Review

How long is your task list? If you’re an Irish 30-something, it’s potentially as long as your arm, and growing by the hour. It might look something like this:

  • Hang out the washing.
  • Pay the gas bill.
  • See dentist about mysterious tooth pain (NB).
  • Budget plan for new kitchen.
  • Bring cat to vet.
  • NCT check.

If there’s one thing most 30-somethings have in common, it’s that many of their tasks end up on the

‘I’ll-get-to-it-tomorrow’ list.

Which means the important task of ‘setting up my pension’ may be at the very bottom of the pile.

We know that a pension plan may not seem like a priority right now, but starting one in your 20s or early 30s is crucial for maintaining your lifestyle after you retire. However, it can seem like a tedious task: all that budgeting, reshuffling your spending habits, and deciding which pension plan to choose. No one’s idea of fun!

To speed up the process, we have outlined a handy seven point checklist for 30-somethings – which means you can tick this important task off your to-do list once and for all (and avoid the pinch down the line).

1. Review any existing pension schemes

Perhaps you set up a pension scheme donkey’s years ago with one of your first employers, but you have no idea what the returns or conditions are. Does it even still apply? Who knows? You certainly don’t.

Before setting up a new pension plan, make sure you know the details of any existing plans, which you’ll find on your monthly statement (this can usually be accessed online via a personal login). If you don’t have a monthly statement, the name of the pension provider will be on your bank statement – simply request a paper statement or online access.

You can then bring these details to an EBS Financial Advisor, who will incorporate them into a new, personalised retirement plan. Sound.

2. Set a target retirement income

The first step is to ask yourself, ‘What percentage of my income do I need for retirement?’ It’s tempting, at this point, to squirrel away just €20 per month, and to wash your hands of it for the next few years. The golden years are so far away, after all, and there’s so many other more appealing ways to spend any extra cash. But this mentality means that many people aren’t as kind to their future selves as they should be.

They can under-pay, or even delay starting their pension, which means they need to fork out a huge chunk of change later in life, to fill the balance. Uh-oh.

Let’s look at an example. Jimmy is an average Irish 30-year-old on a wage of €45,075. He has decided that 50 percent of his current income will give him a comfy retirement cushion of €22,537 per year.

If we take Jimmy’s state pension at an estimate of €12,000, Jimmy will need to fund €10,537 of his pension every year. And if Jimmy’s retirement period is 12.5 years, he will need a total pension pot of €281,718.

3. Check if your employer will offer a contribution

Paying a pension is so important – and that’s why some companies offer ‘occupational pension schemes’, facilitating and contributing to their employee’s pensions. But this is a detail that could easily slip under your radar (especially if you’re the office newbie). Many employers will pay an average of 6-7 percent of your pension. Some offer more, some less – so before setting your contribution in stone, it’s a good idea to check if your current company offers a pension scheme.

4. Look into potential fees and investment returns

Reading the terms and conditions of a financial policy document is no one’s idea of a great Friday night. But doing this could save you hundreds every month. If the charges are not outlined on your initial policy document, it doesn’t mean you’re not paying them – so it’s a good idea to request these details from your provider.

A charge of €10 per month from your financial institution could reduce your pension fund by up to €4,500 (yikes) so make sure you know what you’re signing up for. A good return on investment, on the other hand, could increase your pension pot substantially.

Have a chat with an EBS Financial Advisor about the rate of return available and where your money is being invested; you have some control over this and it’ll impact your savings so get as much information as possible.

5. Work out how much you can save in tax relief

There’s a lot to be said for hitting 30. There’s the added factors of maturity, financial security, and of course, ID never being an issue. Age is just as an important factor for your pension, and will determine how much tax relief you are entitled to from your pension contribution. 30-39 year olds will receive tax relief for pension contributions up to 20 percent of their income.

Depending on the tax band you are in, you can save 20 percent or 40 percent of your pension payments, as they are taken from your account before tax is deducted.

6. Decide your monthly pension contribution

The next step is to decide how much you will contribute towards your pension on a monthly basis.

Will you begin with a minimal amount and increase it as you get older (and as you potentially become more established?).

Or will you bite the bullet and begin saving an equal proportion of your income from the get-go? As a rough guide, our EBS Financial Advisor recommends that your monthly contributions are at least 15 percent of your salary, if your target retirement income is half your salary.

If Jimmy, our average 30-something, decided to evenly distribute his contributions from age 30, he would need to save roughly €335 per month to reach his target.* But if Jimmy was a bit of a procrastinator, and decided to hold off starting his pension until he was 35, his monthly contribution would jump up to €432.

Of course, your contribution will all depend on personal details too – factors like age, other outgoings, and return on investment. Your local EBS Financial Advisor will look at all your financial details, so have a chat with them when you can.

7. Talk to your local EBS Financial Advisor

Okay, so all this might seem like a lot of work. But you know what they say – a task shared is a task halved!

You’ll be glad to hear that you don’t have to tick off the checklist on your own, as an EBS Financial

Advisor will give you a free financial review and retirement plan, completely personalised for your current situation and future goals.

Book your free retirement review today

Why not book your free retirement review with EBS now, and we’ll help you plan for a comfy retirement?

The content of this blog is expressed in broad terms and is limited to general information purposes only. Readers should always seek professional advice to address issues arising in specific contexts and not seek to rely on the information in this blog which does not constitute any form of advice or recommendation by EBS d.a.c.

EBS d.a.c. neither accepts nor assumes any responsibility in relation to the contents of this blog and excludes all warranties, undertakings and representations (either express or implied) to the fullest extent permitted under applicable law.

EBS d.a.c. is regulated by the Central Bank of Ireland.

Life Cover, Specified Illness Cover and Income Protection are provided by Irish Life Assurance plc. EBS d.a.c. is a tied insurance agent of Irish Life plc for life insurance products. Irish Life Assurance plc is regulated by the Central Bank of Ireland.

*Figures based on 6 percent growth year on year.

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