Should I start a PRSA, even though money is tight?

I am 37 years old. I started a personal pension when I was 29. At 35 I moved to the public sector for two years and received the public sector pension. I am now self employed with no pension. I only earn 20,000 Euro a year as I work part-time. Money is tight and I don't want to start a PRSA/pension unless it makes sound financial sense. My husband has a pension from his job which is about 10% of his income. I'm just worried about being a "pauper" when I'm old. Should I start a PRSA?

Hi Kate

Why is money tight?
Is it because you are making huge mortgage repayments?
Are you both making maximum contributions to your SSIAs?

This would be my order of priority:
1)Make the maximum contribution to your SSIAs.
2)Without squandering money, enjoy life. In other words, don't scrimp and save now, so that you will die rich.
3) Get a large mortgage under control through capital repayments.
4)Make reasonable contributions to a pension scheme, if you are being taxed at the top rate.Do not contribute to a pension if you are not at the top rate of tax
5) Make capital repayments on your mortgage.

So, if things are tight because you are paying €500 a month into your SSIA, then forget about the pension. When the SSIA matures, feed it into a pension. If things are tight because you are making capital repayments on a mortgage, consider extending the term of the mortgage to reduce the capital repayment element.

Brendan

I see from another post that you cannot transfer tax relief on pensions between spouses, so I don't know if you will be able to get tax relief at 20% or at 42%.

Brendan

Thanks for your response. Money is tight because of 700 Euro per month childcare costs, mortgage circa 1,000 Euro and I am paying max into SSIA although my husband is not.

What proportion of your mortgage payment is capital and what proportion is interest? You should reduce the capital element as much as possible be extending the term. Your husband should be maxing his SSIA contributions.

Forget about the pension until at least the SSIA matures.

Brendan