People are being advised to “take the bull by the horns" and get a pension plan, even if their workplace doesn't offer one.
There's fresh debate around pensions amid the ongoing political debate about whether the retirement and State pension age should remain at 66.
The Oireachtas Committee on Social Protection has opposed plans to incrementally increase the age at which you can claim the State pension up to 68.
It also advised getting rid of mandatory retirement ages in employment contracts.
Taoiseach Micheál Martin today said the Government will approach the question with an "open mind" and nothing has yet been decided.
While that debate continues, many people may be asking themselves whether now's the time to start investing in their own pension.
Paul Merriman, financial advisor and the man behind AskPaul.ie, told The Hard Shoulder it's clear Irish people are not putting enough into their pension plans.
He said: “If you’re in your 30s or 40s, you haven’t got a hope of seeing a [State] pension before 70 in my opinion.
“The numbers just don’t add up, and they never will.”
He said people do need to put money into a plan - noting it’s great if they have access to a dedicated company plan, but otherwise they need to take “the bull by the horns" and get a plan for themselves.
He suggested the tax relief on pension plans means it’s the “easiest way to build wealth in this country”, as opposed to other investments such as property.
Paul took a number of listener questions:
Is 52 too old to start a pension?
“It’s not too late at all. You’ve got years to fund a pension plan.
“People in their 50s… sometimes think they’ve missed the boat. It’s a stage of your life when you’re really thinking about pensions. But it’s never too late: the trick here is to get one ASAP.
“Make sure you stay away from a bank or somewhere that has very high charging structures. If you only have 16 years, you really need a competitive charging structure.”
Where does the money go when I put it into a pension?
“It’s like an account. Typically, life assurance companies have the biggest market here.
“You set up a personal pension account up, and they look after the pension administration.
“Once it goes into the account, you decide what you do with the money. You can decide to let it sit there in cash - although you wouldn’t do that, as it’s probably a negative interest rate at the moment. Or you choose where to invest the money - all these different companies will have various different funds you can invest your funds in.”
I’m a 69-year-old retiree. I have a lump sum available, but I don’t need to access the fund for a few years. What are my best options?
“Once you take your tax-free lump sum from your pension, you need to do it generally before you’re 75 years of age. Once you take it, you then have to take down a minimum of 4% of that pension lump fund per annum if it’s in what it’s called an accrual retirement fund.
“If he hasn’t taken that tax-free lump and just has a pension fund with a lump of money in it, he can just let it sit there and it will grow tax-free. But he’ll most likely have to make a decision on it at 75 years of age.”
I have a lump sum of €30,000. What’s the best way to put this towards my pension? I already pay into AVCs.
“An AVC is what’s called an additional voluntary contribution. The employer might be paying in 5% and you might be paying in 5%... if that’s so, you can top it up with an additional voluntary contribution and pay in more.
“[Tax relief limits] depend on what age you are… if she hasn’t already [put in the maximum], she should take some of that €30k and top up the AVC.
“This is a really clever thing to do in some cases. If you’re on the higher rate of income tax and you put in €10,000 in… Revenue is going to give you back €4,000. That’s a 40% return straight away before you even invest it.”
You can listen to the full podcast below: