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.
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 2015 is:
|The average national earnings† is:
|That's a drop in income at retirement of:
||€24,734 or 67.3%
You can work out what it would mean for you quite easily. If you earn twice the average national earnings†, (i.e. €73,502) then your income would drop by 83% - a huge gap in you earnings and almost certainly resulting in a change of lifestyle.
Depending on your age now, you may have an additional shortfall in income due to changes in State Pension*. For example, a 30 year old would not receive State Pension (Contributory) until age 68. So you would also need to factor in additional income requirement for this period.
* The State Pension (Contributory) is currently paid from age 66. However, the qualifying age will rise to 67 in 2021 and 68 in 2028 (figure source: www.welfare.ie).
† Based on CSO survey on weekly earnings on all NACE economic sectors (€704.34 per week for Q4 2014).
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 of €410.77 per week (or €21,360 per year) in today's terms.
- For the purpose of determining the term over which pension contributions are made, we have assumed the employee in our example had a birthday exactly six months ago.
- If their target retirement age is lower than the age at which the Social Welfare pension commences (age 68 if they were born on/after 01/01/1961, age 67 if born before this date but on/after 01/01/1955 and age 66 if born before 01/01/1955) the calculations allow for funding for this gap, in addition to the cost of the annuity.
- They are entitled to a full Social Welfare pension of €230.30 per week as at 01/01/2015 which is assumed to increase by 3% per year.
- They are saving for the difference between the Social Welfare pension and their target monthly income in retirement.
- We have allowed for inflation of their target monthly income of 3% per annum between now and their retirement date.
- Any other private pension provision they may have in place has not been taken into account.
- Monthly pension contribution increases by 3% each year up until retirement age and is invested in a pension plan with an annual management charge of 1% and a 5% charge on each contribution, in line with the Standard PRSA fees and charges maximum limit.
- A Gross Investment Return of 5% per annum. This is not a forecast because the value of the investment may grow at a faster or slower rate than assumed and the value of the investment may be expected to fall from time to time as well as rise.
- On retirement an annuity is purchased which escalates at 2% each year, has a 5-year guarantee and is payable monthly in advance. The annuity rate assumes a post retirement interest rate of 3% per annum and no spouse's pension. The actual annuity rate will depend on the selection of dependant's pension, guaranteed period and the escalation rate, as well as interest rates prevailing when the annuity is purchased.
Warning: These figures are for illustrative purpose only and are not an offer of contract. These figures are estimates only. They are not a reliable guide to the future performance of your investment. Actual investment growth will depend on the performance of the underlying investments and may be more or less than illustrated.
Warning: The value of your investment can go down as well as up.
Warning: If you invest in this product you may lose some or all of the money you invest.