How pensions work

Life assurance companies and investment firms are the main providers of pensions in Ireland. They employ fund managers to invest your contributions in one or more pension funds.

These funds are used to buy and sell assets, such as shares, property, bonds and cash. There are many types of pension funds and each fund is invested in a different mix of these types of assets.

For example, a typical pension fund might have:

50% of its assets invested in shares.
30% of its assets invested in bonds.
15% of its assets invested in property.
5% of its assets are held as cash.

The value of the fund rises and falls, depending on the performance of the shares, property and other assets in which it invests. The fund is expected to grow by a certain amount each year but this is not guaranteed and fund values go up and down over the years. The value of your fund will be reduced by any fees and charges you have to pay.

Your pension fund is a long-term investment that you should ideally keep for 20 to 30 years or longer. This gives enough time for your fund to recover growth if it falls in value. Generally, the longer you keep your contributions invested, the more likely your fund will grow in value.

When should I start my pension?

The earlier you start saving for retirement the better. This will give you more time to make contributions and more time for your fund to grow in value. Of course you have to balance this with other financial needs, such as buying a home, providing for your children's future etc.

If you don't start a pension fund until your 40s, you will have less time to build up your fund. So you will have to put more money in to give you the same pension you would have had if you started saving in your 20s or 30s.

If you are older when starting a pension, don’t let this put you off, as it is better to have a smaller fund than no fund at all.

For example, if you are 35, earning €30,000 a year and you want a retirement income of €20,000 a year, including the state pension, you would need to save about €4,200 a year before tax for the next 30 years - correct as of January 2009. See the Pensions Board calculator for more information.

If you were starting your pension fund at the age of 45, you would need to save €6,900 a year for the next 20 years. So it pays to start a pension as early as possible, if you can afford it. Remember, you can get tax relief on your contributions, so the net cost to you will be lower. Use the Pensions Board online pension calculator to help you estimate the yearly amount you need to contribute to meet your pension target at the age of 65.

When can I take my pension benefits?

You can get more information in our section on Retiring.

Who regulates pension plans in Ireland?

The Pensions Board regulates occupational pension schemes and Personal Retirement Savings Accounts (PRSAs) in Ireland. The Central Bank regulates the companies (such as banks, life assurance companies and investment firms) that provide personal pension plans and PRSAs.