# % of salary to pay into pension



## Deimos

I have been offered a pension in my new job, the company will match my contribution up to 3%. (I think I've only read through the paperwork, I really need to sit down with it).

There is a section on the form asking me what % of my salary I would like to add to my pension.

I am 27, renting (saving like a mofo (35 to 40% of my take home) to get on the ladder) with no dependants.

Any help would be greatly appriciated.

Cheers.


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## shaking

the only person who can answer this question is you, how much can you afford to put into a pension? Ideally you should aim for at least 3% as the company will match this, say for example your salary is €30,000 the company is paying €900 into a pension for you. As long as you stay in the job for 2 years this money is then yours to bring with you to your next job, its basically extra cash on top of your salary.

You're still young, the younger you start saving for a pension the better however as your main object is to purchase a house you should contribute what you feel is affordable. Dont forget that you get full tax and prsi relief on all your contributions. If you're a lower tax payer every €100 you invest in your pension will cost you c. €74 net and if you're in the higher tax bracket every €100 will cost you c.€43


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## rmelly

You haven't given nearly enough info for someone to give specific advice.

Try searching this site, or check pensions.ie. The minimum you should pay is 3% to get the matching 3% from employer.

The longer you leave it, the more you'll have to pay in ultimately. 

Then again there are those who say you should focus on reducing your PPR mortgage (or in your case reducing the amount to be borrowed) before pension...


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## LDFerguson

rmelly said:


> Try searching this site, or check pensions.ie.


 
Pensions.ie is unoccupied.


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## LDFerguson

Deimos said:


> I think I've only read through the paperwork, I really need to sit down with it.


 
Nah - stick to your first idea.  I'd bet you'll get a better understanding by reading it.


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## rmelly

LDFerguson said:


> Pensions.ie is unoccupied.


 
Sorry, pensionsboard.ie - check it out.


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## asdfg

Just to add the pensions board only recommends a % of salary less the state pension. Revenue allow max of 2/3 of final salary. I reckon in order to have a decent pension you need to put the max allowed by revenue for each age group. Remember your salary will increase hopefully in real terms before you reach 65. 

Also pension board assums you retire at 65. What if you retire at 60 or earlier.
Look at the other assumptions made by the pension board.


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## rmelly

It's only meant as a guide, as you say the assumptions are just that - assumptions.

Just noticed an Advanced Calculator, seems to be new, supports retirement age between 55 and 70 and some more options: 

http://www.pensionsboard.ie/app_adv_pensions_calc.asp


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## Marc

A good rule of thumb:

Assuming you have no other pension benefits already would be to make contributions equal to a percentage of your salary that is half your age.

So a 27 year old would need to put away about 13% of their salary.

This is the sort of contribution you would need to make to get 2/3rds of your final salary at normal retirement with inflation protecton and spouses benefits assuming a conservative annual growth rate - say 6%pa. Don't scoff, over the last 10 years, the average Irish pension fund has grown by 4%pa according to Mercer.

Scary isn't it? Nearly everyone underestimates the level of contribution required to provide this level of pension. Just a few short years ago, it was normal for a employer to offer a defined benefit pension (sometimes with no contribution at all required by the employee) to provide these benefits.

With the dramatic collapse of the defined benefit pension, in less than a generation, the risk of making provision for our old age has been transferred from the employer to the employee but without any increase in our understanding of the issues at stake.

A final thought: The amount you need to save doubles roughly every 5 years just to stand still. So, to get the same end result as a 20 year old saving €100pm a 25 year old would need to save €200pm. Just to get the same end result!

Start early. Save as much as you can, increase it when you get a pay rise and keep on top of the investments. If you don't understand investments, get really (and I mean really) competent advice.


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