Maximizing Pension

Hi all,

I am looking for some advice and opinions on how I can maximize my pension.(surprise, surprise!)

In short, I am 37 years old and self employed (operating as a limited company).

To date, I have a directors pension with a current transfer value of 70K. I am making monthly contributions of 1,200 Euro to this (Fund spread across 30% Irish Equity, 30% European Equity, 40% Property).

I own a residential property, well almost, 60K remaining to be paid. Current value of property 400K.

I also own an investment property of which there is aprox 45K equity. This property was purchased using an 70% interest only mortgage, 30% interest + capital mortgage.

Because I am self employed (limited company), I want to maximize what I can while I am young and able ;-)

Is there a better way I can combine my pension and investment property to get a better return? Does anyone have advice in general with what I have described?

Finally, I was told in a pub (unreliable source!) that, no matter how well a pension performs, that on retirement, the most that can be taken from the pension is 2/3's of the salary declared. This seems scandalous, as the pension fund may well exceed the 2/3's of what it can deliver year on year.

Any comments / opinions appreciated.

Cheers,

Fresco

Isn't the 2/3rds theoretical for most savers? See [broken link removed] for example:

Theoretically, a private sector worker can fund for a maximum of two-thirds of their final salary for retirement.

However, they need to save 28 per cent of their salary for 40 years to do so. Not many people can afford to save this amount.

This figure is calculated assuming that a person's salary increases by 5 per cent per annum, annual investment growth is 7 per cent and annuity rates (which buy your pension on retirement) are 4 per cent.

Click to expand...

Also, does the 2/3rds limit apply after the deduction of up to 25% as a tax free lump sum from the pension?

Have you sought independent, professional advice on your overall pension/financial situation or do you plan to?

No - the 2/3rds limit is the total limit - it is before the Tax-Free Lump-Sum.

Fresco - a pension of 2/3rds of (for example) a salary of €60k would mean a pension of €40k...the fund value equating to this would be in excess of €1.2 million so most people do not find it scandalous - most people cannot fund this much pension.

Hi,

Thanks for the prompt replies.

I plan to seek professional advice but thought I would let the feelers out to get some opinions.

With regards the 2/3 issue - can we select the period of time to base the % of salary on? For example, lets say, from 50 years old I want to cut down on work, resulting in a reduction of annual salary. Will the 2/3 be based on the current salary at the time or can the policy holder select the salary to use?

Cheers,

Fresco

If you are a company director (which it seems you are) the definition of final remuneration is the "best" three year average salary of total earnings in any of the ten years before your retirement date (normal retirement age can't be younger than 60 - but you can early retire from age 50).

The salary can be revalued in line with CPI (inflation) - so if it is a ten year old salary that you use and nine year old and eight year old then they can be revalued with inflation to the retirement date.