advice for someone new to pensions

J

johnm01

Guest
hi all,

i'm thinking about joining my company pension plan but am unsure of a few things before i do... i have to say i was a bit uncomfortable with the sales pitch by the pensions salesperson... basically i felt like he was just trying to get me to max my contribution asap.
I guess the things i'd like to know are what happens to my fund if i die before retirement and also if a die a couple of years into retirement...is my fund gone?, does it go to my spouse kids if any?...

also for those of you in a plan, what percentage of salary were you paying in?. i know i can pay in up to 15% of my salary (i currently pay 5 matched with 5 by company).. i'm a was a bit shocked that this was no where near enough.... but 15-20% is a large chunk of change to pay out each month..

any advice appreciated
 
There's some key posts at the top of the page, you should read through those. Most company's will pay around 5% contribution. That's what mine do, they match mine. The 15-20% marker would be so you could avail of maximum tax relief. So although 15-20% of your wage would be going into pension fund, you would not be losing 15-20% of your wages, due to tax relief. Others, more experienced with pensions should be able to give you more solid advice.
 
Without knowing more detail (your age, salary etc) its hard to be specific. However I would make the following points:

  • Obviously the earlier you start contributing, the better
  • The higher the contribution ther better
  • You will get a tax break on personal contributions, so for every €100 you contribute the net cost to you will be lower - depending on whether you are a 20% or 41% taxpayer
But:

  • Whilst pension savings is long term (you wont get the funds back until you retire), you have to live today
  • If you have a mortgae, spouse, kids etc it is probably unreasonable to expect to max the pension contribution.
  • You have to balance the need for long term savings with short term expenditures
  • You really need to work out what you can afford to save (net of tax relief), so if you can manage a net €100 p.m. then you are looking at investing circa €200 gross (before tax refief for top rate taxpayer)

If you die before reaching retirement, the value of the fund (employee + employer contributions) will generally be paid to your estate (subject to certain rules).
When you die in retirement, the value of the fund can also pass to your spouse (again subject to certain rules) and depending on how you invest the fund at retirement.

Hope this helps
 
Conan said:
Without knowing more detail (your age, salary etc) its hard to be specific. However I would make the following points:

  • Obviously the earlier you start contributing, the better
  • The higher the contribution ther better
  • You will get a tax break on personal contributions, so for every €100 you contribute the net cost to you will be lower - depending on whether you are a 20% or 41% taxpayer
But:

  • Whilst pension savings is long term (you wont get the funds back until you retire), you have to live today
  • If you have a mortgae, spouse, kids etc it is probably unreasonable to expect to max the pension contribution.
  • You have to balance the need for long term savings with short term expenditures
  • You really need to work out what you can afford to save (net of tax relief), so if you can manage a net €100 p.m. then you are looking at investing circa €200 gross (before tax refief for top rate taxpayer)
If you die before reaching retirement, the value of the fund (employee + employer contributions) will generally be paid to your estate (subject to certain rules).
When you die in retirement, the value of the fund can also pass to your spouse (again subject to certain rules) and depending on how you invest the fund at retirement.

Hope this helps
Click to expand...
thanks for your replies...
im 32 and on 40k per year.....
just reading up on the policy it seems that i might not be able to leave anything to spouse etc when i die.... to me this seems like a huge gamble..... what do people think?
 
Based on your age and salary, I think a total contribution of 10% at this stage is ok. You will need to increase in as tou get older and as salary increases (hopefully).
As for the death in service issue, no need to woory. It is standard practice that up to 4 times salary (plus a refund of your personal contributions) can be paid to your estate (whether made up of the pension fund and any attaching Life Assurance). Does your scheme provide additional Life Assurance? Most provide something (say 2 x Salary or 3 x Salary)
Any excess over 4 x Salary must be used to buy an annuity for your widow.
 
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