Important to be aware of!

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    Financial Companion

    I’ve received a few questions lately about the changes in rules regarding when you will get the state contributary or non-contributary pensions and the effect this will have.

    The old way: Up until the recent changes, the contributory pension was paid from age 65 and the non-contributary (means tested) pension was paid from age 66.

    The New way: This applies for both types. If you were born after 1/1/1948, you may receive the pension from age 66. If you were born after 1/1/1955, you may receive the pension from age 67. If you were born after 1/1/1961 (the vast majority of mumstowners!) you may receive the pension from age 68.

    What does this mean for you? Well firstly, for most of us, it means a 3 year delay in getting a pension. For example, if you are scheduled to finish employment at age 65, what income will you live on for the 3 year gap???

    Next, how sure are we of the government’s ability to be able to be financially strong enough not to have to change the rules again??

    If you are in a company pension scheme or have your own personal pension or PRSA, it would be wise to establish what projected income you are likely to receive when you retire. Often this information is provided to you every year but many people don’t consider it important enough to really consider. Pensions are still one of the most tax-efficient ways of planning for retirement. The current state pension is less than a third of the average industrial wage in Ireland, so if you have no other provision made, how will you cope with such a drop?

    There are three tax advantages in using a pension. The first is the tax relief on contributions. This is currently at your marginal rate (41 or 20%) but there is talk that the next budget may reduce the level of relief, so this could be the last year that you can avail of the higher relief (this is particularly important for any self-employed who must submit their tax returns before October 31st, a €10,000 single premium contribution can reduce their tax bill by €4,100). The second is that the pension fund is free from taxation allowing it to perform better than a non-pension fund. The third benefit is your entitlement to a tax-free lump sum on retirement.

    Considering we tendto spend most money either on weekends or on holidays, retirement is one, long weekend or holiday! Food for thought! :wink:


    Thanks for posting this, I did not know about it. Its good information – looks like many people may run into trouble as a result….

    Financial Companion

    Yeah Sabbi, it’s one of those things that people don’t think too much about because it doesn’t affect them now. But the reality is, if they wait until near retirement time, it’s too late.

    I’ve been dealing lately with people who have reached time to draw their pensions and they can’t get their head around the sharp drop in income (and many still have mortgages in place!).

    I once had a 19 year old contact me to say he wanted to start a pension. When I asked what prompted him to look at that at such a young age, he said "my grandad is retired, has nothing, can do nothing and is miserable. My dad is in his 50’s and has just realised he will be the same. It’s damn well not going to happen to me"!


    My Pension paid out at the tender age of 31…. ah bliss! I cant give out about the politicans 😆 😆 😆

    Dont worry about the 3 year gap, by the time we come to retire in 20 to 30 years time, There WONT be a state pension 🙄 🙄 🙄 We will be lucky if you still get a Free bus pass 😆 😆 😆

    Financial Companion

    You could be close to the truth, Taylor!

    More reason for people to plan their own resources for retirement!

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