# Invest or make pension contributions



## WGT (15 Jul 2007)

Hi,
   I'm an IT contractor with my own limited company. In general I have a surplus in my business account. A colleague of mine suggested that to avoid paying corporation tax, my company should make a lump sum pension contribuion, which makes sense. So my company this year paid 14, 000 into my employee pension.
However, my question is should I do this every year because the money is then tied up for the long term, albeit a very tax efficient approach.
Should I perhaps, withdraw the 14, 000 next year as salary and accept the inevitable income tax and make some medium term investments.
At the moment I have 10,000 invested in a GLOBAL REIT property fund, 10,000 invested in ISEQ 20 EFT and also have 2,000 invested in Quinn Life (with monthly contributions of 500 ongoing).
I also have a house valued at 365,000 with a mortgage of 140,000.
I am 34 years old and have just got married, so I've just wondering should I just take the obvious tax efficient option or is there any merit in investing for the medium term and incurring the income tax in the process.
Any suggestions welcome. Thanks.


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## South (16 Jul 2007)

Hi WGT

A very reasonable question!

I would suggest that you put away for the long-term what you can afford to put away for long-term, but note:

(1)If you are not a high rate tax payer, then pension contributions are not as vital for you as for a high rate taxpayer
(2)Of course, do not lock away more than you can afford in to pension - because it really is locked away! - make sure you have enough emergency funds in cash or 'near cash' should the need arise to access these


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## capall (16 Jul 2007)

14000 is not a big pension contribution to make when you are self
employed
If you do not get some pension funds built up in your thirties you are under alot of pressure after that to be able to pump away the amounts needed  
Also to take out excess cash when you have to pay tax on it at 41% and prsi 5% does not make sense


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## yob (16 Jul 2007)

HI WGT,
i think you did the right thing,but what you should do is drip feed from now on,say one thousand euro a month and if you have profit at end of year you can still top up.the reason you do this is,say you invested youre 14k in an irish equity pension fund,youv'e already lost what ever the iseq is down say 10% 20%,but if your 1000 is now buying shares at a discount and the market starts to rise again your quids in.
this happened me with my ssia,i had done a lump sum investment the year before the ssia,because the way the markets went in year 1 of it its only just making money now,where as i made very good money on drip feeding my ssia,its what i've done with my pension.


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## WGT (16 Jul 2007)

capall said:


> 14000 is not a big pension contribution to make when you are self
> employed
> If you do not get some pension funds built up in your thirties you are under alot of pressure after that to be able to pump away the amounts needed


 
Actually, this 14,000 is in addition to 640 per month contributions, which amounts to about 21, 680 per annum, is this a big enough pension contribution to make for being self employed.


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## South (16 Jul 2007)

What % of salary is that?


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## gonk (16 Jul 2007)

WGT said:


> Actually, this 14,000 is in addition to 640 per month contributions, which amounts to about 21, 680 per annum, is this a big enough pension contribution to make for being self employed.


 
This is a bit of a "how long is a ball of string?" type question. In simple terms, one would normally suggest contributing enough to maximise the available tax-relief, given your age and income. (Subject of course to leaving yourself enough to live on and achieve your short and medium term financial goals.)


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## yob (16 Jul 2007)

as a director in a limited company it makes sense to put as much as possible into your pension as its taken out before the tax man gets involved,however you dont state wheather you have a cash fund for emergacies,do you have dependants,are you planning to have children in the near future,will that involve moving house in the next 5 years,no good tying all your money up in a pension if this is in the planning,this is where you sit down and decide were you are and where your going in the next 5 years and how your going to finance it!!!!!!


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## capall (16 Jul 2007)

WGT said:


> Actually, this 14,000 is in addition to 640 per month contributions, which amounts to about 21, 680 per annum, is this a big enough pension contribution to make for being self employed.


 
If you can afford that it sounds ok,but you would have to review where you are in a few years. Remember you also have the benefit of the gains of your investment growing tax free. 
You also need to keep on top of your pension investments and make sure you are getting a  good return etc

If you were lucky enough to build up a sizeable fund,then you would have the option to scale back contribution take early retirement etc


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## F. Kruger (16 Jul 2007)

WGT said:


> Actually, this 14,000 is in addition to 640 per month contributions, which amounts to about 21, 680 per annum, is this a big enough pension contribution to make for being self employed.


 
WGT,

Just be careful with this. If the company are paying the €640 per month the maximium single premium that they can pay is €7,680 and get tax relief on it(for that tax year). The can pay the €14K but the tax relief will have to be spread forward to future years.

Other option would be to increase the regular monthly contribution.


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## South (16 Jul 2007)

The maximum that the company can put in depends on the members salary.


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