Building And Commiting To A Succesful Pension Plan
Plan to live long!

- By: Coins to Asset
- October 07, 2023
In This Article
Questions to Ask Yourself?
There are 4 priority objectives of personal finance is creating an emergency fund, manage you debts, plan your retirement and build a strong cash flow. This page discusses your retirement.
Do you plan on living a long time?
Do you have a retirement plan and if so do you know where your pensions are?
Have you set your retirement goals?
Have you calculated how much you will spend during your retirement?
Research and Key Facts: The current life expectancy in Ireland is 82 years. When you plan on living long, this impacts important decisions such as your retirement and pension. So you will need to make decisions on when to retire, how to invest your money, or what types of social welfare you will be entitled to. Other factors that you will need to consider is whether you might need long term care down the line and how to make the most of your time. All these questions are will need to be answered at some point in your retirement planning.
As you are planning for retirement ahead, you may be asking yourself where would my income come from when I retire. If you intend to get your income from your retirement savings, then paying a closer look and taking action on saving for retirement is important. Things like membership in a pension scheme becomes extremely valuable. Employer sponsored pension can be very worthwhile to become a member to kick start your savings for retirement.
What Are Your Retirement Goals?
Before you begin to plan your retirement, it might be worthwhile to understand the different types of retirement and which approach aligns best to you. There are 5 types of retirement. Traditional retirement, is the one you begin to save and invest early and often for growth and retire when you are financially able. Early retirement is a bit similar to traditional retirement but the major difference is that your savings and investment rate is higher and you met your financial goals early. Temporary retirement is about working and retire at different intervals. think of it like frequent sabbatical leave. Semi retirement is akin to work like balance, taking a scaled back approach to work, for instance pursuing a new career or starting a new business. Finally mini retirement is a spreading your retirement throughout your life time instead of saving it at the end. The downside is that you never really save up a large sum.
The first step in planning your retirement is to define your retirement goal and create a plan. To define your goals, you should know the pecking order of retirement needs and how to prioritise them. First is Income and day to day spending. Second is the financial reserve – what is in your savings or investment account. the third is Future income and your lifestyle.
A retirement plan doesn’t have to be daunting, the first step is to develop a plan that will take your own situation into account. Once you know where you’re heading, a comprehensive retirement plan is like any good GPS. It helps you get and stay on track to your destination—even as your life, the markets and the economy change. The standard checkpoint is save at least 10% of your gross annual income, however good financial adviser will help you with this. Financial advisers can help you with retirement savings checkpoint and tell you how much you should have invested today to be on pace toward maintaining your current lifestyle through 35 years of retirement. If you’re below your checkpoint today or have a different vision for your retirement, you can work with you to adjust your plan. Be sure to review and update it regularly.
The conclusion is save, save , save. Make savings a priority. Save as much as you can during your working years and if you are employed, your employer may help with a company match.
What Happens When You Retire?
Your State pension will provide you with a basic level of retirement income, provided you qualify. The full single person’s State old age pension is currently €248.30 per week, or just under €13,000 per year. When planning for retirement you will need to decide whether this is enough to live on in retirement, and if not, where your additional income will come from. Most people’s pensions come from one or more of the following sources:
What State pensions are payable in retirement. The State provides two types of pension:
• State Pension (Contributory) which is payable at age 66 to people who have satisfied certain PRSI conditions, and
• State Pension (Non-Contributory), which is payable at age 66, is a means tested pension for those who do not qualify for the State Pension (Contributory) based on their PRSI contribution record. To satisfy the means test, your
income, as assessed in accordance with certain rules, must be below a certain level. The State pensions are intended to ensure that people receive a basic standard of living in retirement. For example, the full State Pension (Contributory) currently is €248.30 per week or just under €13,000 per year. Some people do not receive a full
State pension because they have not been credited with enough PRSI contribution payments. In these cases, lower levels of State pension may be paid.
In addition to your pension from the State, there may also be a qualified adult’s allowance and/or a qualified child’s allowance payable, if the conditions for their payment are met. The State also pays widow’s or widower’s pension, again subject to certain conditions being met.
Further information about State pensions is available on the Department of Social Protection’s website www.welfare.ie.
Digital Retirement Saving Tools
Debt to Income ratio
DTI Calculator
How Much Do You Need To Retire?
• State pension,
• an occupational pension scheme,
• a personal pension plan in the form of a Personal Retirement Savings
Account (PRSA) or a Retirement Annuity Contract (RAC).
The three options that you may be able to use to save for retirement and which are
covered in this guide are:
• occupational pension schemes,
• Personal Retirement Savings Accounts (PRSAs), and
• Retirement Annuity Contracts (RACs).
How much should I save each year for retirement?
Aim to save at least 15% of your income annually—start as soon as you can.
How much do I need to save for retirement?
Fidelity’s guideline: Save 10x your income by age 67.
What will my savings cover in retirement?
Plan for your savings to provide 45% of your pretax, preretirement income.
How can I make my retirement savings last?
Withdraw no more than 4% to 5% from savings yearly, with adjustments for inflation

Occupational Pension Scheme
Occupational pension schemes, or ‘company pension schemes’ as they are sometimes known, are set up by employers to provide retirement and death benefits for their employees. There is no legal obligation on an employer to set up an occupational pension scheme. These schemes are normally set up either under
trust or on a statutory basis. Statutory plans are set up by legislation and provide benefits for employees in the public sector or semi-state bodies.
If you work in the public service, you may receive a pension from the State under the relevant occupational pension scheme when you retire.
What are the main types of occupational pension scheme? There are two main types of occupational pension scheme:
• defined benefit schemes, and
• defined contribution schemes.
Defined benefit schemes provide a set level of pension at retirement, the amount of which normally depends on your service and your earnings at retirement or during your career. A significant number of defined benefit schemes make an allowance for the State pension when providing a pension from the scheme. This is known as ‘integration’ in yhe private sector and ‘coordination’ in the public sector. Typically, this is achieved by
using an offset from salary in respect of the State pension.
Many plans that aim to provide 2/3rds of a member’s basic salary after 40 years’ pensionable service calculate the pension entitlement on the member’s basic salary less 1½ times the State pension. See the guide ‘How does my pension scheme work?’ which is available here.
Defined contribution schemes where your own contributions and your employer’s contributions are both invested, and the proceeds used to buy a pension or other benefits at retirement. The level of your pension will depend on the amount invested, the return on your investments and the cost of your pension at retirement.
Personal Retirement Savings Account?
A PRSA is a contract between an individual and an authorised PRSA provider. There are two types of PRSA contract:
• Standard PRSA which is a contract that has a maximum charge of 5% on the contributions paid and 1% per year on the PRSA funds under management. Investments are only allowed in pooled funds which include unit trusts and life company unit funds, and
• non-Standard PRSA which is a contract that does not have maximum limits on charges and/or allows investments in funds other than pooled funds. Charges may not be expressed as flat amounts and can only be charged as a percentage of contributions and/or fund value. Charges cannot be applied to transfers
to or from PRSAs. This is very important as it ensures that charges are not excessive compared to the level of contributions. For further information see the guide ‘Personal Retirement Savings Accounts (PRSAs)
– A consumer and employer’s guide to PRSAs’, available here.
Who can take out a PRSA?
Employees, the self-employed, homemakers, carers and the unemployed – in fact, every adult under age 75 can take out a PRSA. The relevant legislation does not state a minimum age, however, in practice, this may be imposed by contract law.
Importantly, unlike RACs, there is no requirement to have taxable earnings to pay contributions. The law that introduced PRSAs gives all ‘excluded employees’ the right to contribute via payroll to a Standard PRSA set up by their employer. In summary excluded employees’ are:
• employees who are not offered membership of an occupational pension scheme, or
• employees who are included in an occupational pension scheme for death in service benefits only, or
• employees who are ineligible to join an occupational pension scheme and who will not, under the rules, become eligible to join the scheme for pension benefits within six months from the date they commenced employment, or
Retirement Annuity Contracts
An RAC is the formal name for what is commonly called a personal pension and is a particular type of insurance contract approved by Revenue.
It is a defined contribution pension plan. The value of the ultimate benefits payable from the contract depends on the level of contributions paid, the investment return achieved and the cost of buying the benefits.
Who can take out an RAC?
You can take out an RAC if you have, or have had at some stage, relevant earnings.
Broadly, relevant earnings are earnings from:
• non-pensionable employment, i.e. earnings from a job that are not being pensioned in an occupational pension scheme, or
• a self-employed trade or profession, i.e. assessable under Case I or Case II of Schedule D, for example, the income of doctors, solicitors, farmers.
It is important to note that:
• if you are included in an occupational pension scheme only for a lump sum death in service benefit you are deemed to be in non-pensionable employment and to have relevant earnings for the purposes of an RAC,
• if you have more than one source of earnings you can contribute to an RAC in respect of any source of income that is not pensioned in an occupational pension scheme. For example, if you have a full-time job that is being
pensioned by your employer and a part-time job you can take out an RAC in respect of your earnings from the part-time job,
• you can contribute to more than one RAC in any one tax year,
• you can contribute to an RAC and a PRSA in any one tax year,
• individuals who do not have taxable earnings cannot take out an RAC but may take out a PRSA.
Retirement Calculators
These Calculators will help you make an informed decision about your current or future retirement plans.
Do I have enough retirement savings? What can I change?
Retirement Calculator.
How much will social welfare pay me after I retire?
Social Welfare Calculator.
What will my income and expenditure be after I retire?
Retirement Income & Expenditure Calculator.
How much can I contribute to a Personal Pension Plan?
Pension Savings Calculator
Spending Trends During Retirement
do you expect your expenses to go down when you retire? We call that a below average lifestyle. Or will you spend as much as you do now? That’s average. If you expect your expenses will be more than they are now, that’s above average.
Social Benefits During Retirement
You will be entitled to a contributory State pension if you pay sufficient PRSI contributions at the appropriate rate while in paid employment. Credits received by you while in receipt of certain social welfare payments or allowances can also help you to qualify for social welfare payments. If you do not qualify for a contributory State
pension and your income is below a certain level, you may be entitled to a noncontributory State p
There are a variety of PRSI classes which determine the contribution payable by you and the benefits available to you. Most people pay Class A PRSI contributions and may be entitled to all the main social welfare benefits, including State pensions.
Generally, if you commenced work in the public service after 6 April 1995, then you will also pay Class A PRSI. If you commenced work in the public service prior to April 1995, and you are a permanent and pensionable employee (in an established capacity in the civil service or an equivalent position in the public service), then you will pay a
modified rate of PRSI and may be entitled to only some of the main social insurance benefits.
If you are self-employed, then you may be liable to pay PRSI at Class S for the selfemployed. This also qualifies for pensions. More information on PRSI for the selfemployed is available from the Department of Social Protection.
What happens if I am not paying PRSI contributions?
During any period in which you are not in paid employment or in self-employment, you will not be paying PRSI contributions and so your benefit entitlements may be reduced.
In certain circumstances, however, you may receive PRSI credits. These credits ensure that your social insurance contribution record remains unbroken and may help you to qualify for State pensions
n addition to State pensions, there are a number of additional benefits payable to retired people. These include free travel, and a household package for people aged over 70 (and to people aged under 70 in certain circumstances) that includes help with electricity, gas and TV licence. There are a number of conditions that need to be met in order to receive these benefits and you will need to check these conditions at the time you retire.
Final Thoughts
Pension planning is complicated and time consuming but is a very beneficial activity to engage with. You don’t have to do it alone and indeed it is strongly advised that you contact a pension provider for advice at every step of your pension planning. For most people, their pension is the largest investment they will ever make and it can pay dividends when managed properl
Sources
Nationalpensionhelpline.ie