The Do’s and Don’ts of managing your pension
I would like to increase the value of my pension when I retire. What do I need to consider to allow this to happen? RETIREMENT today only marks a change in lifestyle, not an end to a productive life as was too often the case in the past. Higher living standards and greatly improved healthcare have extended our life expectancy. At the same time our expectations for our old age have increased. We look forward to years of retirement which are active and rewarding. Retirement today is no longer a gentle stroll into the sunset years, but an opportunity to be grasped and vigorously enjoyed.
Planning for your future is important, and pension planning is central to ensuring you can and will live the life you want to lead when you retire. Here are some vital pension do’s and don’ts. THE DO’S
One: Keep up your PRSI (social insurance) record as much as you can - so that you qualify for the maximum State pension. To qualify for the maximum State pension, you must have paid a certain amount of annual social insurance contributions in your working lifetime. However, if there are times when you’re not working, you may be able to get PRSI credits or pay voluntary PRSI contributions to keep your contribution record going.
2. Find out what pension options your employer (if you have one) offers. Although they’re not obliged to, many employers will pay a contribution into your pension on your behalf which, combined with the contribution you’re paying in yourself, can boost the value of your pension.
3. Start paying into a pension as early as you can. The sooner you start the more you’ll have on retirement and the more time the funds will have to grow.
4. Contribute as much as you can afford to your pension, particularly where your employer matches the contribution you’re paying into your pension.
5. Keep an eye on charges, particularly the recurring annual fund charges. You want to keep this ongoing fund charge as low as you can. Passively managed funds, which just follow the market and don’t try to beat it, will usually have much lower charges than so called ‘actively’ managed funds. 6. Get advice from a professionally qualified adviser. Pensions are complex. Good advice can pay for itself many times over. THE DON’TS
1. Don’t gamble with your pension fund, such as by putting it all into one investment (like a single property). Make sure the money in your pension fund is invested in a wide range of investment classes, particularly when you’re older.
2. Don’t have unrealistic ideas about when you can afford to retire. Life expectancy is increasing all the time. You should be prepared to continue working (maybe part-time) until you get the State pension, which is now 68 for most of us.
3. Don’t ignore your annual statement from your provider and file it away. Be proactive and meet with your financial advisor and ask questions such as: What are the charges? Can they be lowered? What are the risks in the market at present? 4. Don’t be afraid to get a second opinion! 5. Don’t rely on the State pension or winning the lottery. Jim Doyle ACMA QFA CGMA is a partner in RDA Accountants, offering full accountancy, business advisory, tax advisory and financial services | 5 Upper George Street, Wexford | 053 9170507 | Hanover Court, Carlow | 059 9142362 | Louisville House, Waterford Road, Kilkenny | 056 7722094 | www.rda.ie RDA Wealth Ltd trading as RDA Accountants is regulated by the Central Bank of Ireland
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