# Too late for pension?



## adox (13 Feb 2019)

I’ve just turned 52, married with no kids and we are currently a one income family, myself being the earner. I earn €40k a year and the job secure as can be expected. 

I’ve had a pension with the company for maybe 15-20 years which up until very recently haven’t contributed to at all, just letting the company contribute. In the last 18 months or so I have started contributing a very modest amount -€100 a month. The pension pot at the moment is a paltry €63k. 

My question is, is it too late at this stage of my life to start making some serious contributions to this pension fund? Would it be advisable, even at this late stage to try and fund it as much as I can?


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## Feemar5 (13 Feb 2019)

You have at least 14 years to retirement perhaps more depending on your employers retirement policy.You an contribute up to 30% at your age and get tax relief AT 20% - you will not get a better rate for your money anywhere else.    Suppose you put in €200 a month , it would cost you €160 and in 14 years you would have €33600 extra but with growth should be a lot more.   Its never too late and it is not wise to depend on state pension.


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## moneymakeover (14 Feb 2019)

I would say it's a good time because you have only 14 years to retirement
So you will be getting the benefits not too long away
Also the amount you can contribute is increasing eg 30%,  35%, 40%


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## so-crates (14 Feb 2019)

adox said:


> My question is, is it too late at this stage of my life to start making some serious contributions to this pension fund?


No it isn't too late, there is only so much you will be able to add but whatever you can add will be beneficial. It may not have as much time to grow but that doesn't mean you shouldn't do it. Even a small additional contribution from you should improve your pension pot.



adox said:


> Would it be advisable, even at this late stage to try and fund it as much as I can?


Yes it would be. It is better in terms of savings because the government effectively contributes to your pot too. So if you were to maximise your contributions to the 30% of your income, you would add €12,000 pa and the government would lower your tax bill by €2400 so the cost to you would actually be €9600. It isn't a small amount to consider but it might be worth sitting down with your partner and seeing what your goals are and what ye can reasonably achieve. Working down from a maximum rather than working up from a minimum is probably a better strategy for you.

Once ye have done that and have a clear picture in your minds about what ye can do and what ye want to achieve, I would also suggest it might be worth having a sit down chat with a (preferably independent) financial adviser. It would also be worth looking at what your current pension pot is invested in and determining whether it is the best investment for you and also what sort of end point you want to target for your pension (Cash/Annuity/ARF) - the sort of end point you want will be important in terms of planning your pension, especially in the last 7-10 years working. I am going to guess you are probably in whatever the default strategy is, that may well be the best option for you but it is worth examining it in detail firstly by yourself and then with an advisor and being sure.

It is also a good idea to have a look at the resources and information on this website https://www.pensionsauthority.ie/en/

Just to add, I am making an assumption that you are in a defined contribution pension. Is this correct?


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## adox (14 Feb 2019)

so-crates said:


> No it isn't too late, there is only so much you will be able to add but whatever you can add will be beneficial. It may not have as much time to grow but that doesn't mean you shouldn't do it. Even a small additional contribution from you should improve your pension pot.
> 
> 
> Yes it would be. It is better in terms of savings because the government effectively contributes to your pot too. So if you were to maximise your contributions to the 30% of your income, you would add €12,000 pa and the government would lower your tax bill by €2400 so the cost to you would actually be €9600. It isn't a small amount to consider but it might be worth sitting down with your partner and seeing what your goals are and what ye can reasonably achieve. Working down from a maximum rather than working up from a minimum is probably a better strategy for you.
> ...



Hi, thanks so much for the reply(and to the other contributors.

Yes its a defined contribution pension.
I havent paid to much attention to it to be honest as mortgage etc took priority. However my circumstances have changed in the last two year. We have paid the mortgage off early and I have received some inheritance very recently too so have a healthy sum of cash(for us at least) sitting on deposit in various accounts until I decide what to do with it.

I think I will max out the pension from here on in for the time being and see how i go with it. It will reduce my take home pay significantly but it is more than affordable with the lump sum we have.

I am meeting with my financial advisor next Monday morning to discuss the pension and he is also aware of the money i have inherited so I will talk to him about that too as its doing little or nothing at the moment. I have no experience whatsoever in the stock market so am a little nervous to start going down that route but I need to do something with it to stop it depreciating over time.


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## so-crates (14 Feb 2019)

adox said:


> Hi, thanks so much for the reply(and to the other contributors.
> 
> Yes its a defined contribution pension.
> I havent paid to much attention to it to be honest as mortgage etc took priority. However my circumstances have changed in the last two year. We have paid the mortgage off early and I have received some inheritance very recently too so have a healthy sum of cash(for us at least) sitting on deposit in various accounts until I decide what to do with it.
> ...



I am sure the advisor will know best but, it may be worth considering using that inheritance (or some of it at least) as contribution to your pension, you would still get the tax benefit but you wouldn't have to take the pension contribution out of your salary. Obviously that would mean it would be tied up in your pension so you would lose immediate access to it.

The likelihood is you are already invested in stocks via your pension and generally most people do not invest directly in stocks, but rather buy units in funds that do so. Understanding that risk and working out how comfortable you are with it is where the advisor will hopefully be most helpful. Before making any decisions it would be good to tease out your feelings about risk. 

Just remember that as interest rates are so low at present, keeping that money on deposit means that its value is depleting (inflation outstrips any interest paid, and that interest is also taxed!). There is risk whichever path you choose.


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## adox (14 Feb 2019)

so-crates said:


> I am sure the advisor will know best but, it may be worth considering using that inheritance (or some of it at least) as contribution to your pension, you would still get the tax benefit but you wouldn't have to take the pension contribution out of your salary. Obviously that would mean it would be tied up in your pension so you would lose immediate access to it.
> 
> The likelihood is you are already invested in stocks via your pension and generally most people do not invest directly in stocks, but rather buy units in funds that do so. Understanding that risk and working out how comfortable you are with it is where the advisor will hopefully be most helpful. Before making any decisions it would be good to tease out your feelings about risk.
> 
> Just remember that as interest rates are so low at present, keeping that money on deposit means that its value is depleting (inflation outstrips any interest paid, and that interest is also taxed!). There is risk whichever path you choose.




Thanks again. I didn’t even realize that I could make large contributions to my pension rather than have to have it go through my wages and still receive the tax relief. This will be the route I will go down with my pension so. There’s plenty in the inheritance pot(circa 300k after tax)so it will be a good way of starting to put some of it to work.


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## aristotle (14 Feb 2019)

There are limits to what you can put into your pension each year if you want to get tax relief. 

You can make larger contributions but you won’t get tax relief and then you have to remember that you will be taxed on the way out of the pension so may not make sense to do that.


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## adox (14 Feb 2019)

aristotle said:


> There are limits to what you can put into your pension each year if you want to get tax relief.
> 
> You can make larger contributions but you won’t get tax relief and then you have to remember that you will be taxed on the way out of the pension so may not make sense to do that.



Thanks, yeah I will max out what I can claim relief on. I will discuss with financial advisor other avenues for the rest of the funds and of course the best options for my pension but fully utilizing the tax relief seems like a no brainer.


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## Sarenco (14 Feb 2019)

Hi @adox

You only get tax relief on contributions from your "net relevant earnings" (essentially your wages).  In your case, that's capped at €12k per annum (30% of €40k).

If I was in your situation, I think I would do something like the following:-

I would contribute a lump sum of €10k to your pension for 2018 (you can do this at any time before the end of October 2019) and increase your ongoing pension contributions to €1,000 per month (from your wages).  I would invest all pension contributions in a global equity (stock) fund.
I would keep ~€50k on deposit (an instant access savings account) and would buy ~€50k worth of 5-year State savings certificates from An Post.
That leaves you with around ~€190k.  Assuming you don't want/need to upgrade your home, I would be seriously tempted to buy an investment property (perhaps a small apartment) in your wife's name.  It's certainly not a risk-free option but, all going well, you could be looking at an additional income of around €12k per annum, with minimal (if any) income tax.
If the idea of becoming a landlord fills you with dread, you could look at an investment trust with a high dividend yield (something like City of London Investment Trust Plc) but ultimately that's a stock market play and I'm conscious that you are nervous about going down that road.
I'm sure your financial adviser will have plenty of other suggestions.  Just make sure you understand the fee structure/commission arrangements on whatever products are suggested.

You should also consider whether you have sufficient life assurance & income protection for your circumstances.  Also, it makes sense to write a will (if you haven't done so already) and put enduring powers of attorney in place.

Hope that helps.


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## adox (14 Feb 2019)

Sarenco said:


> Hi @adox
> 
> You only get tax relief on contributions from your "net relevant earnings" (essentially your wages).  In your case, that's capped at €12k per annum (30% of €40k).
> 
> ...



Hi Sarenco and thanks for such a detailed response and suggestions.
Excuse my ignorance but if you only get tax relief on contributions from your “net relevant earnings” then the only way to avail of the tax relief is to fund this through your wage? Any lump sum contributions wouldn’t quality for tax relief?

State savings does seem a convenient and safe option with a return but essentially probably losing money taking inflation into account? I do realize though for higher returns I would have to increase the risk significantly.

With regard to an investment property it’s not something I considered. On face value it does seem a bit daunting but I will discuss all options with financial advisor.

My gut instinct with savings has always been to hoard it for that “rainy day” or worst case scenario. A very low risk “money in the bank” attitude. With rates non existent I realize that my lump sum will essentially lose money year on year and this will be even more costly with a larger amount.

I have a lot of thinking and learning to do as I have been used to having 40-50k in savings with a much larger mortgage with the goal of getting the savings higher than the outstanding mortgage.
With the mortgage gone and a sizeable amount(for our financial status)in the bank I do need to re think my ultimate goals and how to best use this money.

The way this thread has gone I probably would have been better opening it in Money makeover rather than in here so hopefully it’s ok.

My plan is to meet with the financial advisor(a few times if necessary) and then take my time and weigh up my options. The one thing I am more or less definite on is “maxing out” the pension contributions.

Forgot to say I don’t have any life assurance or income protection so may look at these too


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## RedOnion (14 Feb 2019)

adox said:


> then the only way to avail of the tax relief is to fund this through your wage? Any lump sum contributions wouldn’t quality for tax relief?


Pretty much. But if you didn't use your maximum allowable last year, you can make a small lump sum before October to use last year's allowance (you'll have to do a tax reclaim for it).

@Sarenco  has made a very good point about investing in income earning assets, but in your wife's name so it's taxed at her tax rate.

Also, you need to start thinking about your wife qualifying for state pension. @Marc started an excellent thread on the current PRSI rules around unearned income.
https://www.askaboutmoney.com/threa...with-investment-accounts.211564/#post-1600138


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## johnball (15 Feb 2019)

you should talk with the financial adviser about your pension fund buying the investment property, you can have hands on or off options if you don't want to go down the landlord route. the rent generated goes back into the fund and it's not taxed or classed as income. all fees related to that property gets paid through the fund. there's not a whole lot of downfalls to this path from what i know?


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## RedOnion (15 Feb 2019)

johnball said:


> you should talk with the financial adviser about your pension fund buying the investment property


Virtually impossible in OPs circumstances since last month.


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## johnball (15 Feb 2019)

i was told that the legislation isn't expected to be passed until next month, march. but, if the pension funds were transferred into a PRSA, the PRSA can still purchase a property?


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## RedOnion (15 Feb 2019)

Even if it's technically possible, the OP has such a small pension pot that it would be hugely leveraged.

There's interesting comments about the use of pension to buy property in the following thread: https://www.askaboutmoney.com/threads/pension-investment-in-property.211210/

One of the reasons to specially mention property (or an income generating asset) 
to OP is because income would be taxed at lower rate if in wife's name.
The tax treatment of all asset classes within a pension structure is the same, so there's no reason to favour property.


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## adox (18 Feb 2019)

Thanks again all who took the time to contribute to this thread. 
Just an update after having an initial meeting with my financial advisor in work today. 

He echoed many of the suggestions here. Make a will as soon as possible. Consider income protection and life insurance/assurance. 

He had figures done out for me with regard to my pension that showed costs and reliefs involved if maximizing the contributions, not something I had mentioned but he was aware of my inheritance. I already had my mind made up to contribute the full 30% of pay to it and the wheels are in motion on this. 
I hadn’t realized I was in a relatively conservative fund with the majority in a balanced fund. There was also 25k in a legacy SuperCAPP fund which is an even “safer” fund. His advice was to consider moving some if not all into an international equity fund(suggested on here as well), or to consider it at least. 
He also advised about being able to make a lump sum payment for 2018 up until October this year. 

Also advised on an emergency fund and park some cash in 5 years state savings(again suggested here). 

We will meet again in the coming weeks and months to discuss potential investment advice etc but I’m happy enough with what I’ve done so far. 

I will move all the pension funds into an international equity fund as well as all my contributions going forward, which are increasing 10 fold from €100 a month to €1000 a month. Employers 10% contribution will also go into this. 

I think I will put €50,000 into state savings for five years. I know the return is low but it’s the best of a bad bunch at the moment compared to what the banks are offering. That amount can sit there for the five years with out needing to be touched. 

I will do some thinking over the coming weeks and take my time before deciding what to do with the rest of the money. 

Any feedback welcome.


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## so-crates (19 Feb 2019)

It looks like you have it well in hand 

The only other suggestion I would make is that whilst it is important to plan for the future it is also important to live today. The inheritance is sizeable enough and the majority of it you should of course be forward planning however, you should allow yourself to use some of it on something a little more indulgent. Perhaps if there is somewhere you have always wanted to go visit, set aside a budget for that.


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