Three Pension Plans

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Retirement planning is vital for people to live a comfortable life after they stop working. However, it is very important to observe if your pension allows for your retirement plans and lifestyle expenses. Whether you have a pension with the employer you are working for or you have a personal pension, it is important to understand your pension as it will suggest what you can expect for retirement savings. Here are the differences between the three pension plans:  

Employee pension plans are plans started by your occupation that provide income after you retire. The Employee pension plans are monitored by the The Pensions Authority. Employee pension plans may be contributory, meaning both you and your employee can contribute to the pension plan, or non-contributory, meaning only your employee can add to the fund. Two types of employee pension plans are defined benefits and defined contributions. Defined benefits are pensions plans in which your benefit expectations have been defined in relation to either earnings, years at the company, or a specified index. On the other hand, defined contributions are pensions in which contributions are made towards your retirement but, unlike defined benefits in which you know your final pension, the actual value of this pension plan will be determined by growth.

Those who do not have a pension plan with their occupation or those who work for themselves would have Personal pensions. Unlike the Employee pension, Personal pensions are not monitored by The Pensions Authority. Those with a Personal pension plan pay money upfront to an insurance or investment company, and the company invests your money to grow your retirement savings. The funds you provide to the insurance or investment company remain in this fund until you retire. Upon retirement, those with a Personal Pension plan can take out their savings. However, you can only take out €200,000 if you do not want to be taxed. There is an income tax rate for anything over €200,000.

Finally, there is also a State Contributory Pension. This pension is available to anyone over the age of 66 who has paid social insurance contributions. The State will contribute to your retirement savings even if you have another pension plan, such as a Personal pension, as long as you meet the government’s social insurance conditions. While this plan can be beneficial to those who have another pension plan, the State Contributory pension may be nearly impossible to live off alone during retirement. The rate the State pays those over 66 is very specific and is based on the number of yearly social insurance payments and the date of when the individual qualified to receive a State Contributory Pension. The exact rate you can expect can be found under “Rates” here: