Retirement Planning for Employees
We all wish to retire at some stage in the future. However, the majority of us have given little or no thought into how much we will need to save in order to enjoy a 'happy retirement'.
The simple fact is that the current State pension* just about covers life's bare necessities. It is important that you think about what standard of living you want to have when you retire - and how much you will need to save, if you are to achieve that goal.
State Pension - the facts
- The current State pension is just under €12,000 a year or €230 a week.*
- If you earn €50,000 a year net, just before you retire, having to live on the State pension alone would represent a 76% drop in your standard of living.
- If you were faced with a drop in income of 75% or more tomorrow, what would you have to cut back on?
| Will you have sufficient income in retirement to pay for....? |
| Survival | Other Basics | Comforts | Luxuries |
|---|---|---|---|
| Weekly Food | Private Medical | Regular Meals Out | Holidays Abroad |
| Heating | Landline and Mobile | Basic Holiday | Weekends Away |
| Light | Car - Tax/Insurance/Fuel | Home Improvements | Replace Car |
| Gas | Basic House/Car Repairs | Entertainment (Pub/Cinema) | Pursue Dreams (Buy a boat / Travel the World / Live abroad) |
| Medical | Cable TV | Gifts for children, grandchildren and loved ones | Financial support for children, grandchildren and loved ones |
| Home Insurance | Internet | Club Membership (Golf/Gym/Other) | Leave a Legacy / Pass on a business/Provision for loved ones |
- Do you have a private pension plan? If so - when was the last time you reviewed it?
- Do you know what additional income your pension plan will give you?
- Will you be able to afford to pay for the things you need and will want to have/do when you retire?
* The State pension referred to throughout this document is the state contributory pension for a single person aged 66 or over.
Choosing the best pension - Solutions for employees whether you are in a scheme or not
If your employer does not have an occupational pension scheme, you are eligible to set up a Personal Pension Plan or a Personal Retirement Savings Account (PRSA) to save for retirement. You are solely responsible for this area of your financial future. Your employer may already have designated a preferred PRSA provider.
If you are in a company occupational pension scheme, then your employer is contributing towards building up your pension fund. However, you cannot assume that your company occupational pension scheme will provide sufficient income for you in retirement. The combined employee and employer contribution levels may be too low and the fund may be underperforming.
Talk to the experts
If your employer does not have an occupational pension scheme in place, your AIB Financial Adviser can advise you on how you can put your own Personal Pension Plan or PRSA in place, taking into account your financial goals and what you can afford.
If you are already in an occupational pension scheme, you need to review it regularly with your pension provider and see if you should be making Additional Voluntary Contributions (AVCs), to top up your existing plan.
If you wish to make AVCs, your existing pension provider may be able to facilitate these additional payments or in some circumstances, your employer may allow you to pay AVCs into a pension of your choice, in which case we can help.
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Warning: Past performance is not a reliable guide to future performance |
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Warning: The value of your investment may go down as well as up |
This information is based on AIB's understanding of current law, tax and Revenue practice, November 2010.
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