Making Cents: When it pays to look to the future

By Gráinne McGuinness

Life is busy and it is easy to plan on doing something for a long time without actually getting around to it.

Whether it is clearing out that attic or finally tackling that patch of garden, often we only get around to these tasks when we are forced by external circumstances.

This is also true of many personal finance decisions. Many of us get on board with health insurance only when approaching 35 and facing penalties. 

Buying a house and the birth of children are often the prompt to finally sort our proper life insurance cover, in case the worst should happen.

One issue that often is let slide for far too long, because there is no obvious trigger, is retirement planning. 

When workers are busy trying find the time, money and energy for day-to-day life, it can be hard to worry about the distant future.

But most of us will live longer than our parents and grandparents and a demographic shift means we should not rely on the state pension to provide us with a comfortable old age. 

There are Government plans to introduce auto-enrolment, ensuring all private sector workers over a certain age and income level automatically start a pension. 

But it is not due to start until 2022, which is four years of contributions workers could sorely miss later in life.

So no matter how busy your life and how distant a prospect retirement seems, it is worth setting a day aside to assess your current situation and see if change is needed. 

And yes, I am talking about people in their 20s and 30s, not just those over 40. 

The good news for younger workers is that any funds you put away now have much longer to accumulate interest and grow. 

A person aged 45 who decides to start a pension will have to pay in close to double the amount of a 25-year-old, for the same result when retiring at 68.

The good news for older workers who may have been unable to pay or neglected pensions when they were younger is that there are tax incentives to contribute extra to your pension rise considerably as you age.

When considering how much you need for your retirement, you need to consider the lifestyle you hope for and any changes to your current spending patterns. 

Many people upgrade their health insurance as they get older, to give themselves higher levels of cover and care at a time when health issues can accumulate.

You need to think about how you will spend your time when you are no longer working. If you have plans to travel or take up new hobbies, will you be able to afford it? 

On the other side of the equation, other expenses you have currently may no longer apply.

If you are paying a mortgage, that will hopefully be cleared by retirement age, a major expense gone. Education and other expenses associated with rearing a family should also be finished. 

A general rule of thumb from pension planners is to aim for a pension worth between half and two thirds of your salary. 

The current maximum state pension (contributory) is €243.30 per week, €12,651.60 per annum. 

The non-contributory pension is less. Take that figure from two-thirds of your salary to get an idea of the shortfall you are facing.

The Pensions Authority has a calculator on their website which makes it easy to assess exactly how much you need to pay to get to the pension you want.

Pension planning is one of the areas where it is worth sitting down with a professional and do a proper assessment. 

There are many independent brokers around, the Society Of Financial Planners Ireland provides a list at [ur=][/url].

Your own bank will also normally offer a financial planning service at no cost, although they may be ties to offering products from particular providers.

When going bring in as much information as you have, including any current pension you are paying into and any pension contributions you have made in the past at previous jobs.

If you have a partner, do this financial planning together to ensure you maximise any tax benefit.

Deal of the week


If the recent sight of sunshine had you dreaming of the long summer days ahead, Lidl has just thing on sale this Thursday.

Channel your inner Homer Simpson with your very own hammock, on sale for €49.99.

There’s a choice of two sizes and both come with a tubular steel frame the manufacturers promise can be put together without tools.

It comes with a three-year guarantee and a case for storage.

If you are more likely to be heading for the seaside than lazing in your own back yard, Lidl has a whole range of beach paraphernalia going on sale the same day.

Highlights include a pop-up beach shelter for €14.99 and a range of inflatables from €6.99.

They also have parasols, beach mats, towels and neoprene balls ideally suited for splashing around in the water.

If you discover the kids have grown out of all their summer gear, Lidl also have a range of shorts, t-shirts, sandals and other summer essentials on sale since yesterday.

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