Maxing out on contributions?

H

Hayden

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Hi guys. In my 30s but only looking at a pension now for the first time. Earning 35k and no mortgage/debts (or savings really). At the moment I'm making a 5% contribution to my pension plan and my employer adds another 10%. Considering my age, I gather the maximum amount I can add on top of my 5% is another 15%.

Would it be wise to take advantage of this 15% and just max out my contributions? At the moment I'm contributing €145 p/m and have the opportunity to bump this up to €583 p/m. Now obviously this will impact my take home pay and what sort of money I can save elsewhere but considering the tax relief I'll be availing of, it seems like the right move. Thoughts?
 
Are you getting any other pre-tax deduction, like an annual commuter ticket?
It is a close call between getting the 40% tax salary invested in the pension and saving for house, but little point in contributing too much to drop below the high-rate bracket.
You should provide more information to get some better advice, maybe you should save some rainy day money in the bank first!
 
No, the only other thing I avail of is a BIK (health insurance). Sorry about the lack of info. Yes I have a rainy day fund (8k) but not much else when it comes to savings (5k). Contemplated opening a Degiro account but investments are something I have no idea about so best to avoid it at this stage I think. For what it's worth, saving for a house isn't on the horizon at the moment (content with renting for the time being).

ant dee said:
little point in contributing too much to drop below the high-rate bracket.
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Sorry but what exactly do you mean by the above?


Thanks for taking the time to reply by the way :)
 
Hayden said:
For what it's worth, saving for a house isn't on the horizon at the moment (content with renting for the time being).
Click to expand...

Saving for a house should be done years in advance. If there's any chance you'll buy somewhere in the next 5-10 years start saving for it now.
 
Hi Hayden,

You're in your 30s and are putting 15% into a pension...well done!
You have 13k in rainy day / savings...well done!
Pay off any loans you might have and stay debt free.
Save for a roof over your head...you'll want one sooner that you think.

Firefly.
 
Now, roughly speaking, you are paying 20% income tax until €33,800 income, and 40% after that.
The pension contributions are done pre-tax, so for the higher tax balance, you are getting a good deal paying €60 to get €100 invested.
€35000 minus 5%, drops you to €33250, below the standard rate cut-off point, so any additional contributions would only get the 20% tax advantage, costing €80 to invest €100.
Capital gains aren't taxed in the pension, but management fees are greater than what you could get from a low-cost broker on the market. You will still have to pay tax on pension withdrawals as income.

It all your decision in the end, and noone knows the future but it might be a better idea to get some some of those pathetic regular saver accounts we have ( check the best buys section of this forum) and continue building up like €40k for a house.
 
Firefly said:
Hi Hayden,

You're in your 30s and are putting 15% into a pension...well done!
You have 13k in rainy day / savings...well done!
Pay off any loans you might have and stay debt free.
Save for a roof over your head...you'll want one sooner that you think.

Firefly.
Click to expand...
Solid advice there. I'm about same age and this is basically what I did exactly.
 
My advice would be that (if/as) your salary grows, try not to allow your expenditure to grow commensurately.
 
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