Friday, March 24

How to get the most out of your Pension in Ireland?

A pension plan is not just any other investment option but rather is one such investment option that will act as a financial safeguard when you no longer remain a part of the workforce. 

Given its significance, it is better to start planning instead of waiting for your retirement to be around the corner. In this article, we discuss how you can ensure that you are making the most of your pension plan. 

If you are not making the most out of your pension plan, reading up on a few tips would surely help boost your strategies. 

Let’s try and understand how one can make the most out of their pension plans in Ireland. 

  • Know the tax cap and utilize it completely 

As members of the workforce, each employee is allowed to invest a portion of their income into their pension plans without paying any taxes on the returns that are realized. 

This percentage of income grows as we spend more years as an employee, and most of us do not even realize that we are not investing as much as the limit allows us to. Therefore, as you become a more seasoned employee, it is necessary to ensure that your investment pot is not losing out on any benefits you might otherwise be eligible for. 

  • Keep an eye out for employer contributions

Most pension plans in Ireland receive some percentage of contribution from the employer. Depending upon the type of pension plan that you have opted for, this could be fixed or subject to change. 

If your pension plan does not state clearly whether the contributions are fixed or floating, you can always check in with your financial advisor.

They would not only provide you with the necessary information but will also give you suggestions on how to gain the most from any such investment plan. 

Many financial advisors have stated on many occasions that by not making the most of the employer contribution program, many employees are essentially agreeing to receive a lower salary. 

  • Consolidate all of your pensions under a single banner 

Having multiple pension schemes is one of the most common traits of today’s workforce. However, it is not because you choose to have multiple schemes that you have them but rather is a result of switching jobs. 

Each employer creates a pension fund for their employees as and when they join the firm and become its member. This fund receives contributions from the employer as well as from the employee. However, given the automated nature of these transactions, we tend to not remember such a fund, especially if it has been years since we last worked for that company. 

So one of the most effective ways of enhancing your pension fund is by searching for all funds that exist under your name. Once you have found all such schemes, consolidating them would not be difficult. 

Another notable point here is that many firms are incentivizing the process of switching to a different pension scheme by offering an enhanced transfer value. 

In simple terms, you’re being paid to change your plan. So if you’ve been considering changing your pension plan, this might be a good opportunity. 

  • Reassess the investment planned for your fund.

One of the lesser-known ways in which you can increase the receivable amount of your pension is by increasing the amount of money it makes. 

Each pension scheme is clubbed with various other such funds and taken together as a collective whole that gets invested into a plan as decided by investment bankers who are investing on behalf of all the people that have any such fund. 

Low-risk appetite is characteristic of most pension funds. Given that, the rate of return might not be as high as it could be for higher-risk portfolios. 

This is where the opportunity lies. Switch your fund from a low-risk portfolio to a higher-risk one and increase the chances of your pension plan giving you more returns than previously envisioned. 

The only downside to this option is that since the risk is high, there is a fair chance that the portfolio may not perform as well as it has been designed to. 

This is why this suggestion is for the seasoned investor or for someone who has a reliable financial guide. Given the complexities that occur with investment options, you would tend to agree with me on that. 

In summation, it’s prudent that you be aware of how many plans there are, how many have you opted to become a part of and what sort of returns are you hoping to get from any such plan. If you are sure about these elements, it becomes fairly easy to tweak your schemes favorably.   

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