Turning 50? Here’s What You Need to Know About Your Pension Fund
Turning 50 is a time to reflect on how far you’ve come, and plan for where you want to go. By the age of 50, many people will have climbed the career ladder, possibly even changed careers once or twice, and have a wealth of experience under their belts, both personally and professionally.
While retirement might still seem a long way off (and don’t worry, it definitely is!), 50 is a great age to stop and take stock of your pension. You’d be surprised by just how much you can boost the value of your retirement fund by making some smart changes to it (with the help of a qualified financial advisor, of course).
If you’re approaching 50, here are four questions you need to ask yourself about your pension.
What kind of pension fund do you have?
If you don’t know the answer to this question off the top of your head, we strongly suggest that you take some time and get to really know your pension. There are many different types of pension funds and schemes available in Ireland, and chances are that over the course of your career you’ve been a member of more than one of them. Here’s a brief recap of the main types of pension funds:
Executive or Occupational Pension:
These are company pension schemes, that employers and employees can both make contributions to. If your employer is contributing to your pension fund, it’s likely that it’s an executive pension as it’s the most common scheme in the country.
A personal pension plan is generally a scheme for those who are self employed (i.e. sole traders) or who don’t have the option to join a company pension scheme.
A personal retirement savings account is a scheme that is popular amongst part-time workers, self-employed individuals, and those seeking employment.
Do you have any multiple pension pots?
Many people change employers every couple of years, and as a result accumulate several pension funds. Once you’ve ceased employment, any funds in your pension pots stop growing, as you become a deferred member of that particular scheme. These funds can still be drawn down upon reaching retirement (age of access varies depending on the type of pension scheme).
However, there is currently over €500 million of unclaimed pension benefits in Ireland. The most common reason behind this is because people lose track of their old pensions. So not only do those pension pots essentially decrease in value over time (due to inflation), you may even lose the funds that you’ve accumulated in a pension fund, no matter how big or small it was, if you don’t claim ownership over it. Therefore it’s in your best interest to do a head count of every pension fund that you have – if you need more advice on how to track down any old pensions, check out this blog.
Did you ever work in the UK?
At any point in your career, did you spend time working in the UK? If the answer is yes, and you haven’t already done so, you should consider transferring the fund back to Ireland. A QROPS (Qualifying Residential Overseas Pension Scheme) facilitates this kind of transfer. The benefits of moving your UK pension back to Ireland include:
- Having your pension in one currency (Euro)
- Having better conditions over the accessibility of the fund in the event of your death
- Taxation can be more beneficial through a transfer to a personal retirement bond – any excess in a pension fund over the Standard Fund Threshold is subject to 40% tax in Ireland. However, ransfers from a UK pensions scheme into a QROPS don’t count towards this threshold. Learn more about transferring a UK pension to Ireland here.
What changes can you make now to reach your retirement goals?
So the big question now is, what if any changes can and should you make to your pension fund so that you have the best chance of reaching your financial goals in retirement? Depending on the type of pension scheme you are a member of, you may be able to access it as soon as you turn 50 and are no longer an employee with that the company (if it’s an executive scheme). Is this something that you would like to do, or would you prefer to rev up your pension contributions over the next decade and a half?
Now is the time to speak with a financial advisor to ensure that any decision you make is an informed one. If you still have multiple pension pots, bringing them all under one roof into a Personal Retirement Bond could really change the course of your investment in your latter working years. As well as this, you should also consider things like:
- Can you plan to increase your pension contributions as your salary rises over the coming years?
- Should you put any bonuses into your pension fund?
- Are you taking advantage of any tax relief that is available to you, for example through additional voluntary contributions?
Whether you’re about to turn 50 or are just setting up your first pension, we can help you to make the most of your investment. We are impartial advisors, who are committed to providing the best possible options to our clients. Book a free discovery call with a member of the Elevate Financial Planning team today.