Young and Pensions

J

johnmck

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I'm a young man - 28 - I own my own company - which is doing very well even with the downturn - recently have had a number of people pushing pensions my way.
Not sure what to do? Where should I be putting some of the company profits? Should I even be considering pensions!?! Should I do it myself - SART?

Also, should I consider income protection cover?
 
In principle you probably should consider starting a Pension, particularly if you business is going well and you have surplus cash which you can extract from the business. However, before going down the Pension route you should consider:
- Will you need cash to get a mortgage (do you own your own home?)
- What cash requirements will your business have for the next few years?
- Will the business be looking for cash to expand/acquire?

At age 28 you still have plenty of time to put a pension in place and if your business continues to do well you can easily make up any unfunded years at a later stage. At this stage I would focus on the business, maximise its success and at age 35 (say) start to look at pensions.

As for income protection, that might be worth examining. Remember that income protection only pays out if due to illness/injury you suffer a loss of income. Would your business continue to be successful if you were not active in it?
 
Hi Cona,
Thanks that was the kind of answer I was looking for.
I don't have a house - and would like to buy one next year maybe. So would like to take some money out of the business for that.

Without me the business would not survive - so that answers the income protection.
 
A few points for you to consider:

· Everything Conan says is good
· Its not either (mortgage/income protection) or (pension). You can do all of the above. This year, you could put some money towards a mortgage deposit and some towards a pension (and definitely some towards income protection). Next year, when you start paying your mortgage, you could reduce your pension contribution accordingly.
· Bear in mind that if you are paying tax, and especially if you are paying tax at the higher level, a pension payment is allowable at the higher rate, which means that Brian Lenihan almost doubles your investment. This is probably your best ever opportunity to get something back from the state.
· I am 22 years older than you. The money I stuck in my pension 22 years ago has truly gone forth and multiplied. The money I am putting in now will be lucky if it is still in one piece when I retire. (The early bird and all that)
· Start now, no matter how small your monthly/annual contribution. Like most habits, getting started is the hardest part.
· And one other point to bear in mind, it is almost impossible to take your pension money out again until you retire. So don’t overcommit in terms of monthly/annual contributions.

Lastly, you mention SART. The very mention of this term would suggest that you have limited knowledge of what is available. (No disrespect intended) I would strongly advise that you get the advice of a good independent financial advisor. Not an insurance company, not a GURU, not a one product sales muppet. There are a few who post on here and who you might like to consider.

Best of luck with it.
 
Thanks for the advise.
I'm reading a book at the moment called "The tactics of the rich" by Paul A Overy. He's an Irish Financial Advisor - so maybe I'll start by getting advise from his company
 
If you're paying income tax at the higher rate, I think you'd be crazy not to at least start a small pension.
 
Hi johnmck,

Pensions are a very gray area, even though you have the Pensions Board, itsyoumoney.ie etc all giving out very independent advice and information.

The difficulty as I see it is that most people that are not very familiar with pensions either do not have the time to interest to interpret the information presented.

You'll find a basic and easy to read document on pensions here: [broken link removed].

There is also some more information on retirement planning on the website too.

Hope this helps,

Bob
 
Depending on how the company is doing, a pension is definitely worthwhile to start earlier rather than later.
I bought a house 2 years ago and try keep some contributions at present, im self employed myself so its not that easy. When you have extra cash its definitely a good idea from a tax and future planning point of view.

In short the earlier you start the more you get later in life! :D
 
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