# Paying into a pension for 16 years. Think I need advice



## colin79ie (26 Mar 2019)

I have been paying into our company pension for 16 years, paying 3.5% and company paying 5% of salary. Salary has gone from circa 38k in 2003 to 85k currently (since 2010). I also pay AVC of 134/month so at the moment I'm paying around 729 per month. This will increase slightly with a recent 2% pay increase and 2 further pay increases in 2020, 2.5%, and 2021, 2.25% I plan to put all into the pension.

I'm 40 this year and was always told to start early etc and that's what I done at 24 but it just seems to be less than what I anticipated perhaps.

The company changed provider in 2017 and looking online on the new provider website area, I can see the fund value. Premium paid 136k, current value 146k. Does that sound right?

Also, there is nowhere on the client pages where I can see what they charge and when.

Lifestyle strategy is 'legal and general ARF', Mix 100%.

Looking at the paperwork on statements, the previous provider projection was 831k at retirement, whereas the current one says 706k at retirement. I know it's a guessing game but just curious.

I have very little knowledge on pensions and what I need to do/not do so am wondering if I need to take independent advice or if that is even permitted under our group scheme. Office is not very helpful in this regard.

I am currently beginning to do some research and learning on the whole pensions thing to educate myself but it appears daunting to say the least.


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## moneymakeover (26 Mar 2019)

When you say



> Lifestyle strategy is 'legal and general ARF', Mix 100%.




How are the funds invested?


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## colin79ie (26 Mar 2019)

moneymakeover said:


> When you say
> 
> 
> 
> ...



L&g multi index V fund series B . ??


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## moneymakeover (26 Mar 2019)

One year return 7.92% seems okay

I suppose what about previous 15 years because series b like recent fund
Launched September 2016


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## blured (26 Mar 2019)

moneymakeover said:


> One year return 7.92% seems okay
> 
> I suppose what about previous 15 years because series b like recent fund
> Launched September 2016


 
I think this is probably a quirk of switching pension providers. The €136k premiums paid was the total value of the contributions and asset growth over the previous 15 years that was then invested with the new provider - growth shown is just the one year performance of that amount


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## colin79ie (6 Apr 2019)

Thanks.

Just as a follow up question, I have a payrise of 2% due in May and 2% again in May 2020.

I'm thinking I should put these into my pension. Do I just get payroll to add these amounts onto my current AVC of circa 135/month?


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## so-crates (8 Apr 2019)

There should be a standard procedure for changing your AVC. Yes, payroll will have to be involved but in order to instruct them formally you probably have to fill in some form somewhere. They may be able to direct you to it or alternatively it may be outlined in your pension handbook.


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## colin79ie (8 Apr 2019)

Ok thanks.

I should have worded it differently perhaps.

My question is whether it is more beneficial to me to put the payrise into the avc rather than take it in my salary, provided I don't need the extra pay?


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## so-crates (8 Apr 2019)

Ah, in that case...

Currently, if I understand you correctly, you are contributing as follows:

Income: €85,000
Employee: 3.5%
Employer: 5%
AVC: 135 (~2%)

Your contributions currently amount to around 5.5%

If you take it as a pay rise, basically you get half the amount, the rest is gone in tax, USC & PRSI.

If you put it in as an AVC, you pay PRSI and USC but not the 41% tax.

As a 40 year old, you can pay up to 25% in a tax efficient manner, so you are well below the ceiling at present. If you don't need the money, then it is certainly better from a tax perspective.

it might be worth having a look at the Pensions Authority website and using their calculator to get a feel yourself for how changing your AVC will impact your pension outcome.

https://www.pensionsauthority.ie/en/Calculators/Pension_Calculator/


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## colin79ie (8 Apr 2019)

Thanks for that.
So the calculation tells me I'm not putting enough in for 50% pension and need to be at 18%

It's a pity I didn't start researching this 10 years ago 

They should really teach this stuff at second level.


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## so-crates (8 Apr 2019)

We can only start from where we are  and though I would agree with you on teaching it at second level, I think pension stuff doesn't really sink in until you're past 30!


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## colin79ie (8 Apr 2019)

Indeed.
It was in my head to start early, which I did.

However, between no knowledge or understanding and living my life through my 20s I should have had a better handle on it 
I'm now 40 and realise I should have perhaps paid more earlier, although I do appreciate I am better off than a lot of people my age.


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## so-crates (9 Apr 2019)

The simplest way to change the situation is to increase your AVC slowly 1-2% at a time over the space of a couple of years. It is surprisingly manageable to do. The cost of each increase is less than you would expect because of the tax benefit. As you are getting a pay increase it is a good opportunity to do so because you are talking about income you currently don't enjoy anyway so you won't feel the loss of it.


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