Late starting a pension - I'd appreciate some guidance please

As per title really, I'm new to this website but I've had a little browse around this forum and find it's topics interesting and there seems to be good knowledge posted by various users.

I'm looking to start a pension, (if not too late) I'm late 30's. I know I'm late to the party and it's a bit scary when I read of other posters with massive wages and massive pension pots. My main reason for starting a pension is because I'm a good saver getting practically 0% interest rate (as are many folk) and understand there is good tax relief on them and also I'm partially concerned there may well be no state pension by the time I'm of retirement. I'd probably be of the low to medium risk type, maybe some high risk at the start to make up some time.

I'd appreciate a recommendation on what pension I should consider and here are some details that might help such recommendation to be made: (if more info needed please ask)
Some details:
Gross wages about 30k, no mortgage and won't require one, no company pension in place and working on basis employer won't be contributing, I'd like one that I can contribute lump sums into or at least at the start as I'm starting so late to make up for lost time, would like the option of withdrawing at 50 as opposed to 65/66 etc. I'm not planning on early retirement but I like the flexibility of being able to take the money or some of it when I want or if some opportunity presents. I won't need the money in the short term, not before 50 anyway. Currently saving approx €1200 p/month. I have no existing debt / loans.
I think I'd like the flexibility to be able to alter the regular monthly contributions as and when I please rather than to be tied to whatever original amount is paid.

From searching and reading this forum, I believe the employer compulsory pension facility is the best option to set-up, although I think I read that these can't be withdrawn at 50 and only at the later 65/66, is this correct? Also, I read something that you can't withdraw at 50 if still working for the same employer the pension is set-up with? If this is the case, am I better off with an alternative Personal pension? Am I correct in thinking a PRSA is pension through the employer compulsory facility and a personal pension is an independent one you obtain yourself. Are both paid at gross, or would your personal one be paid into via your Net pay? Regards the ones you can withdraw from 50yrs on, are you penalised for doing so then even though they allow it? Do you pay tax on this withdrawal? Is the tax relief gained when you pay in cancelled out by the tax you pay on the way out?

I suppose the big question (after selecting a pension product obviously) then is how much to pay in each wk / month, do I pay in the max I can benefit from the relief? And how much of a lump should I initially pay in, willing to pay in 50K in an original lump, I'd still have some savings for a rainy day if I did this.

With no mortgage and no need for one in the future, is a pension the most obvious means of saving / investing ones money? From reading the forum, the general advice seems to go in the order of mortgage first, then max pension contributions and then alternative investments such as shares / bonds, state savings, etc...

Sorry for long post, wanted to provide as much info for accurate advice, Thanks in advance.

First, no such concept in Ireland of "employer compulsory pension facility".

You may be thinking of a PRSA, which the employer is obliged to allow salary deductions to, but the employer is not obliged to contribute to.


Second, the tax relief is restricted to a % of your earnings, so you can't get tax relief on 50k lump-sum in one year.


Third, as you earn below 35/36k, then you will get just 20% tax relief on conts, not 40%.

This may make the pension conts less attractive.

You may still want to go ahead, fair enough, but the tax relief will be less.

@Protocol - Thanks for the reply. Yes, the employer pension facility where the employer is obliged to allow salary deductions to, which you say is a PRSA is what I was referring to. Are there any differences between a PRSA and a pension I go and set up myself independent of the employer?

I believe PRSA stands for personal retirement savings account, the words savings account suggests to me this is a more like a savings account than a pension? Is there less risk with a PRSA than with an independent personal pension type I could set-up myself?

If I can't pay a lump sum of 50k in in one year, could I pay it in in lumps in the first few years? If I pay the max contribution monthly to gain the highest tax relief will I then not be able to pay a lump in under tax relief as I'll have used up the tax relief with the monthly contributions. Would it be a case of either pay a lump iand use the tax relief on that and then dont pay regular contributions for the rest of that year? Or if I make the regulart monthly contributions and then pay a random lump in, how much tax will be charged on the lump? Will there be any tax charge on a random lump sum I wanted to pay in?

I would still be happy with the 20% tax relief as I think it is still good way for me and my position to save / invest some money for latter years.

MoneyInc said:

I would still be happy with the 20% tax relief as I think it is still good way for me and my position to save / invest some money for latter years.

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I wouldn't be worried about 'only' getting 20% tax relief. It's very likely that you won't be paying any tax at all in retirement, unless you manage to save a lot of money! The funds within the pension will grow tax free. It'll work out better than investing outside of a pension.

MoneyInc said:

the words savings account suggests to me this is a more like a savings account than a pension?

Click to expand...

It's just the name of the product.

At a very simplistic level, the main advantage of a PRSA is that your employer must facilitate salary deductions and payments into it for you. That means your payslip reflects the tax relief.
If you were to go set up some other form of contract yourself, you'd have to pay in the total from your net salary, and then claim back the tax later. It's just extra paperwork.

With standard PRSA contracts, there are maximum charges. You might get lower charges with a personal pension, but realistically only if you are making large contributions.

The following is a summary post from a regular poster here, @SBarrett which gets into more detail about.

Regardless of the type of pension you set up, you couldn't access the funds at 50 unless you'd left the employment it relates to.

In terms of making lump sum payments, you could set up a pension now, and make a lump sum contribution in relation to last year, and claim tax relief on it. You would need to make the contribution before October in order to do that.

You can get tax relief on 20% of your salary until the year you turn 40 when it increases to 25%. So you could start now with a 6,000 contribution for last year, and put in another 6,000 this year, and so on. It doesn't matter if you contribute monthly, or in lump sums (or a combination!), it's an annual limit for tax relief.
Technically, you could make a 50k contribution now, and claim the tax relief back over a number of years, but that might not make sense.

Personally, I'd start out by having a conversation with a financial advisor / broker to explore options for your circumstances.

Like PRSA is just a name for a pension, Financial Advisor is just a name for a person who sells financial products. Asking one for advice is like asking a car sales person for advice about buying a car.