Hi iamapsinner. I'm not sure which part of it is confusing, so I'll try to assist on a couple of points:
The amount you can contribute to your pension and get full benefit of tax relief changes as you get older. The increased amount is available in the year of your birthday - this isn't always understood. So somebody who is currently 49 and will turn 50 later in 2021 can contribute 30% in that year. See the following table.
Age | Percentage limit |
---|
Under 30 | 15% |
30-39 | 20% |
40-49 | 25% |
50-54 | 30% |
55-59 | 35% |
60 or over | 40% |
Regarding the need to make preparations for early retirement look at it this way. Say you are single and have a modest lifestyle and want to be in a position to spend €25,000 yearly after you retire (This includes all bills and expenses but excludes mortgage as you have that paid off). If you retire at 66 (the state pension contributory age) you you are entitled to the full state contributory pension of €13,000 you will need a personal pension of €12,000 to make up the difference. So you will need a pension fund at the time you retire at 66 sufficient to pay out €12,000 yearly.
However if you want to retire at 60, two things change. Firstly you have no income for the years from 60-66 so you will need a pension pot at 60 that can pay you the full €25,000 for each of the first six years, therefore your pension pot has to be at least €150,000 greater (to keep this simple I'll ignore the Benefit Payment for 65 Year Olds). Secondly, by retiring six years earlier, you have six years less contributions going into your pension pot. So for our 49y/o (almost 50) to retire at 60 he has 10 years rather than 16 years to build up his pension pot. And he needs a considerably larger pot to fully fund the first six years of retirement. I hope that this makes sense.
My comments here are just by way of example and I have ignored a huge number of very relevant factors such as State Pension eligibility and sliding scales, Availibility of Jobseekers Benefit, Disability Benefits, Inflation, Indexation, Compounded Growth, Investment Choices, Employers contributions, etc etc, all of which matter). There are a number of pension specialists around these parts who will do a far better job than I can at working out exactly how much you need in order to retire early and have a reasonable income. But the basic message is that early retirement needs planning and the sooner you get started the better.
Last point - don't let yourself be bamboozled by pension speak - if your adviser isn't making sense thats not your fault, tell him/her to try again, try harder or replace them !