Could you manage your retirement on the contributory state pension?
There’s no crystal ball to help predict the future (sorry about that). But it’s highly likely that you’ll live to celebrate your retirement, be in pretty good physical shape and have another 20 years or more ahead of you.
How you spend those years will depend on what you’ve managed to save or accumulate in pensions or investments. Another way to look at it is to think about how you’d manage on the (contributory) State Pension alone.
| State Pension (contributory) for 2009 is: | €12,017* |
| The average industrial salary is: | €33,140 |
| That’s a drop in income at retirement of: | €21,123 or 63% |
You can work out what it would mean for you quite easily. If you earn twice the average industrial salary, then your income would drop by 82% - a huge gap in your earnings and almost certainly resulting in a change of lifestyle.
* The State Pension (contributory) is paid from age 66. For qualifying employees, the same level of benefits are payable from age 65 under the State Pension Transition. (Figure Source: www.welfare.ie)
A PRSA can help bridge the gap
Here’s a quick example**:
A 30 year old employee, contributing 20% of a €36,000 salary, retiring at age 65 would earn an income in retirement of €502.74 per week (or €26,142.48 per year)
**Assumptions: This figure includes the State Pension (contributory) of €230.30 per week. Retirement age of 65. 414 monthly contributions. Current salary €36,000. Salary and contribution escalation of 3% p.a. Investment return of 6%, inflation rate of 3%. The annuity rate used assumes a male life, spouse’s reversionary pension of 100%, post retirement investment return of 4%, a 5 year guarantee period and 2% escalation p.a. The figures above assume the continuation of current expense charges, a 4.25% contribution charge and a 1% annual management charge.
What's your plan?
The good news is that you can plan a comfortable retirement simply by making the most of the cash, savings and investments you have now and the Government will give you a hand along the way.
All it takes is a little planning and we can help.
Not sure which PRSA is right for you? Our case studies might be helpful.
Warning: These figures are estimates only. They are not a reliable guide to the future performance of this investment. The value of your investment may go down as well as up. Benefits from a PRSA may be affected by changes in currency exchange rates.