Pension or just saving for retirement

[cremeegg]

Where a person wishes to save for retirement, is there any reason to do so within a pension other than the tax saving.

A friend works through their own company. The company makes no profit because any available surplus is paid to the owner out via wages. This is not expected to push the company owner into the higher rate tax band.

 

[Steven Barrett]

If they pay directly from the company into a pension, there is no tax at all or PRSI/ USC due on contributions.

They need to look at what they can expect to get out of it at the end and ask whether it's worth it. The AMRF makes pensions very unattractive for people who are going to have small pension funds.

But drawing down a pension and paying the whole lot (after tax free lump sum) at the lower rate is more tax advantageous than saving the money and paying tax on the growth at 41%.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Brendan Burgess]

This is not expected to push the company owner into the higher rate tax band.

They should not be contributing to a pension if they don't get tax relief at the marginal rate.

They should save outside the pension scheme e.g. by paying down their mortgage if they have one or saving up for the deposit on a house if they don't.

When they eventually reach the top rate of tax, they can then max their contributions and get the maximum tax relief.

Brendan

 

[cremeegg]

Thanks for the replies.

[QUOTE="Brendan Burgess, post: 1539300, member: 1"

When they eventually reach the top rate of tax, they can then max their contributions and get the maximum tax relief.
[/QUOTE]

We can only hope

 

[Steven Barrett]

They should not be contributing to a pension if they don't get tax relief at the marginal rate.

They should save outside the pension scheme e.g. by paying down their mortgage if they have one or saving up for the deposit on a house if they don't.

When they eventually reach the top rate of tax, they can then max their contributions and get the maximum tax relief.

Brendan

It is their company making the contribution, not the person.