New Ireland Pension Plans

Your pension contributions are invested in a wide range of funds. As the fund performance goes up and down, monitored by the fund managers, your pension value changes.
This gives your fund a great chance to beat the low rates of deposit interest, and reduce the effect of inflation on your pension.

You have full control of the level of risk of your fund. Normally the higher the risk level of the fund the higher the growth. However higher levels of risk mean you’ll have greater volatility meaning your investment may lose money as well.

When you’re saving and building your pension fund through monthly contributions or annual contributions you save on income tax. This makes a pension the best value long-term savings product.

Example 1:

35 years old earning €35,000 per year.
Contributing €200 gross every month into a pension.
After tax reliefs this only costs €161 per month.
Saving €40 on every contribution (20% saving).

Example 2:

45 years old earning €50,000 per year.
Contributing €200 gross every month into a pension.
After tax reliefs this only costs €118 per month.
Saving €78 on every contribution (39% saving).

Example 3:

55 years old earning €50,000 per year.
Contributing €300 gross every month into a pension.
After tax reliefs this only costs €180 per month.
Saving €120 on every contribution (40% saving).

Your fund grows tax-free until you take your pension benefits. This is the only kind of investment account that can do this.

When you retire, you can take a tax-free lump sum of up to 25% of your fund.

You then decide to invest the remaining funds in an Approved Retirement Fund (ARF) or an Annuity.

When you retire you need to decide what to do with your pension fund.

You can take the money from the fund, but you will have to pay income tax on anything above the 25% tax-free lump sum amount. This will remove all the good you did in building your fund in the first place!

Luckily there are 2 other options available to you.

Option 1: Approved Retirement Fund (ARF)

An ARF is a post-retirement investment fund. The goal of the fund is to continue to grow the money you invest in the ARF. Like pensions, there is no tax on the growth of the fund.

You can access your funds in a flexible manner and many people with ARFs withdraw the growth gained in the calendar year leaving the balance to grow again the next year.

You do pay income tax, USC and PRSI (if applicable) on any withdrawals from your ARF.

Option 2: Annuity.

An Annuity is a regular income for the rest of your life. It provides a guaranteed income for your retirement. It is a lifetime income attached to one person. Annuities can be a good option for those who want a guaranteed income, but be careful when exploring how these are inherited by spouses.