RandomUserName
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The plan: I am a post-2004 entrant to the Defence Forces. Under our fast-accrual pension system, I will have 40 years service at 50 years of age (each of last 10 years counts double), and be entitled to retire at that age, with a mandatory retirement age of 56. Cannot get a straight answer regarding supplementary pension at that age, but assuming I can secure that entitlement I would expect a pension of approx €30k. Ideally I would intend to be fully retired from 56 as the supplementary pension system is a major disincentive to take on other paid employment.
What I'd like some advice on, is how best to provide a pension/income for my wife in this situation? She is currently working in the home and is a registered childminder. As such, she can earn a tax free income of <€15k and I can avail of her tax credits and higher standard rate cut off. She pays class S PRSI each year of €500, giving her entitlement to maternity benefit and state contributory pension.
I had been under the impression that I could put money into an AVC to provide a fund for her retirement, but I now realise this is not the case as I will have full service and get 1.5 times final salary lump sum and cannot use AVC to increase this (correct?).
Your tax advantages are limited in your circumstances. However, some thing to think about might be to consider your PPR. You have 100k equity, your salary situation may allow you to get a mortgage of c. 200-250k. Upgrading your PPR will be tax free. A larger property (300 - 350k) could be targeted that would allow you to rent a room, income potential of 14k that you could earn tax free. In addition, overseas is mandatory for your contract (?) so you will be able to use that to reduce the mortgage, every couple of years. At retirement you can down size, and realise a lump sum (tax free) that could be used for you/your wife in retirement. Obviously dependent on the property market but there is a long runway between here and there. Also, retirement in your mid 50's is a long road. You will have 30k for 10 years or so before your wife gets the SPC.Specific query: Would it be best for us to start overpaying our quite modest mortgage, potentially we could afford to clear it in 10 years (early 40s), or my preferred option, is there a tax deductible way to fund a pension for my wife? We would like to have ~€10k pa for her from age 58 until her state contributory pension kicks in (presumably 70+ for our generation)
You are 100% correct on your points regarding pay disparity, unfortunately I've learnt from bitter experience that no matter what any review/report/commission etc finds, all that can be hoped for is the usual "fiver per week" across-the-board pay "increase".
Apart from that all I can say without getting too specific is that a change to another sector at this particular time would involve significant retraining and an initial drop in salary for a few years, but indeed there would be scope for significantly higher earnings eventually.
There is a lifestyle element to consider also which is quite a personal choice of course. I do consider the potential to retire quite young to be worth something versus getting a higher salary.
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