Over paying into pension?

P

pclive

Registered User
Messages
33
Age: 40
Spouse’s/Partner's age: I am single

Annual gross income from employment or profession: 70,000
Annual gross income of spouse: N/A

Monthly take-home pay: €4,300 including income from rent a room scheme.

Type of employment: e.g. Civil Servant, self-employed: permanent public servant, joined in 2004.

In general are you:
(a) spending more than you earn, or
(b) saving? Mostly saving what I earn.

Rough estimate of value of home: Recently for it valued as moving lender €380,000
Amount outstanding on your mortgage: €180,000
What interest rate are you paying? About to draw down my new mortgage over 12 years with KBC fixed for 2 years at 2.3%. Planning to overpay this by 10% per month.

Other borrowings – car loans/personal loans etc No other loans or borrowings

Do you pay off your full credit card balance each month? N/A I use a debit card
If not, what is the balance on your credit card? N/A

Savings and investments: €30,000 in savings in my KBC extra regular saver account. I currently save €1,000 a month into this account.

Do you have a pension scheme? Zurich Life pension with a current value of €62,000. I currently save €760 a month to this.

Do you own any investment or other property? No

Ages of children: No children

Life insurance: Death in service and mortgage protection.


What specific question do you have or what issues are of concern to you?
I am thinking of trading up in about 2 years. Should I reduce the amount of money I'm saving into my PRSA?
 
Just checking that your Zurich PRSA is an AVC-PRSA?

I suppose if you plan to sell and buy, you will need a 20% deposit, which could be towards 100k, so yes, it seems sensible to build up cash savings rather than the pension.
 
Currently saving 12k per yr over 2 yrs is 24 on top of current 30 gives 54k for a min 20% deposit. At this rate you wont be able to trade up unless you save significsntly more which you cant do unless you reduce avc accordingly
 
OP will have >€200k deposit from sale of house along with cash savings. So no need to worry about increasing savings. Or am I missing something?
 
  • Like
Reactions: mtk
I assume your PRSA is an AVC (not just a Standard PRSA). You need to confirm this as you don’t have any other relevant income out of which you can contribute to an ordinary PRSA. I am also assuming that you are a member of the Civil Service Defined Benefit scheme, with c40 years potential service, so I would query what scope you have for AVCs. Whilst you probably are included in an “integrated” pension scheme, that means you can realistically only fund to offset the State Social Welfare Pension. If you continue to save c€760 pm as an AVC you could potentially be overfunding (Which makes no sense).
I think you need to make sure it is an AVC PRSA and then check you are not overfunding (ask whatever advisor set up the PRSA).
 
Conan said:
I assume your PRSA is an AVC (not just a Standard PRSA). You need to confirm this as you don’t have any other relevant income out of which you can contribute to an ordinary PRSA. I am also assuming that you are a member of the Civil Service Defined Benefit scheme, with c40 years potential service, so I would query what scope you have for AVCs. Whilst you probably are included in an “integrated” pension scheme, that means you can realistically only fund to offset the State Social Welfare Pension. If you continue to save c€760 pm as an AVC you could potentially be overfunding (Which makes no sense).
I think you need to make sure it is an AVC PRSA and then check you are not overfunding (ask whatever advisor set up the PRSA).
Click to expand...
Thank you for the reply. Yes I am on a defined benefit scheme. I will phone my advisor on Monday and enquire re the PRSA.
 
Conan said:
I assume your PRSA is an AVC (not just a Standard PRSA). You need to confirm this as you don’t have any other relevant income out of which you can contribute to an ordinary PRSA. I am also assuming that you are a member of the Civil Service Defined Benefit scheme, with c40 years potential service, so I would query what scope you have for AVCs. Whilst you probably are included in an “integrated” pension scheme, that means you can realistically only fund to offset the State Social Welfare Pension. If you continue to save c€760 pm as an AVC you could potentially be overfunding (Which makes no sense).
I think you need to make sure it is an AVC PRSA and then check you are not overfunding (ask whatever advisor set up the PRSA).
Click to expand...

I spoke with Zurich life this morning and they informed me that the pension is an AVC/PRSA.
I have reduced the contributions from €700+ to €100 a month to save some additional funding for trading up.
 
You already have €200k equity in your house and even if the market drops over the next 2 years with repayments you should still have about that. Unless there has been a massive crash which should also reduce your target house price. Added to your €54k cash savings (assuming the €1k a month continues). How much more do you really need? Do you have a target area or market in mind? That will inform how much you need to save.

Obviously if you are planning on keeping your current property, this changes things but you seem to have indicated above that you do plan to sell it.

If you have assessed your situation and have decided you do need to increase your savings to have extra flexibility, meet your goals etc. Do you really need to reduce your pension contributions to increase your savings?

You have €4,300 Net Income so if you subtract you approx €1,500 monthly mortgage repayments and €1,000 saving it still leaves €1,800.

Assuming a generous monthly estimate of
  • €200 utilities (electricity, heating)
  • €400 holidays/special event savings
  • €200 home & car insurance and costs
  • €100 broadband/phone
  • €450 food
This would still leave you €450 to "play" with...
 
You must log in or register to reply here.
Back
Top