Government Incentives

Save and get a helping hand from the state

The principles of pensions are simply that:

1. You set aside money now on a regular basis.
2. This money is invested for you until you reach retirement age.
3. On retirement, you can access these accumulated funds to supplement your income and help maintain the standard of living you have become accustomed to.

Tax benefits

The Government provides valuable tax incentives to people who start a pension. The Government will boost your pension contribution via tax relief that can nearly double your payments.

Source: Ark Life August 2008

To illustrate the importance of tax relief and investment growth, the chart above illustrates how a typical €250,000 fund could be built up over a 40 year period.

If you start your pension at 25 and retire at 65, it’s quite possible it will build up a considerable value. For example, assuming you are a top rate taxpayer (based on current tax rates), if you paid in € 49,174 over 40 years, the government would add €34,168 through tax relief plus investment returns based on 6% would add another € 166,658 – altogether totalling a tidy €250,000.*

*Source: Ark Life August 2008

Here’s the maths

A top rate tax payer who puts €100 into a pension plan may get a tax & PRSI rebate of up to €47. That means you can save €100 into a pension plan by paying in just €53

This information is based on AIB's understanding of current law, tax and Revenue pratice, September 2008.

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