The Complete Guide to Pensions: How to Plan for the Retirement You Deserve
What is a pension?
A pension is a long-term savings plan with one key purpose: to provide you with income in retirement. It allows you to invest money over time, often with tax relief, and draw it down when you stop working.
Unlike a regular savings account, pensions:
Grow tax-free
Offer tax relief on contributions
Are usually invested in a mix of assets to grow over time
2. Types of Pensions
Personal pension plans (pPP)
Set up by individuals, usually with the help of a financial advisor or broker. Best for the self-employed or those without an employer pension.
Personal retirement savings account (PRSA)
Flexible pensions designed for individuals and employers. Portable and often used when moving jobs or if your employer doesn’t offer a scheme.
Standard PRSA – Charges are capped
Non-Standard PRSA – More investment options, higher charges
Employer sponsored pensions (Master-Trust)
Also known as occupational pensions, these are provided by your employer. They often include employer contributions and access to group investment funds.
Defined Contribution (DC) – You and your employer contribute regularly. The value depends on how well the investment performs.
Defined Benefit (DB) – Less common now. Promises a fixed income based on your salary and years of service.
Additional voluntary contributions (AVC)
Top-up contributions made in addition to your main pension plan. Used to boost your retirement fund and gain further tax relief directly from payroll.
Another pension vehicle called an AVC PRSA which is done through a separate investment provider and declared to revenue through your income tax return.
Standard pension limits apply to AVC’s, according t o your salary and age related limits.
Why start a pension early?
The earlier you start your pension, the more powerful the effects of compound interest — growth on top of growth.
Think of it like a snowball rolling down a mountain: If you start at the top of the mountain, even with a small snowball, it has a much longer distance to roll. Over time, it gathers more snow, grows larger, and gains momentum. By the time it reaches the bottom, it’s significantly bigger than a snowball that started halfway down.
That’s exactly how compound interest works. When you invest early, your money earns returns — and then those returns start earning their own returns. It’s growth multiplying over time.
Benefits of starting early:
Bigger retirement fund without needing huge monthly contributions
More time to ride out market volatility
Maximise the available tax relief each year
Less financial pressure as retirement approaches
tax relief on pension contributions
One of the biggest advantages of pensions is the tax relief you get on your contributions:
Age Tax Relief Limits (as % of income)
Under 30 15%
30–39 20%
40–49 25%
50–54 30%
55–59 35%
60+ 40%
The Maximum salary revenue will consider is €115,000 per annum.
The rate of tax relief you receive depends on your marginal rate of tax:
If you earn below €44,000 per annum, you receive 20% tax relief
If you earn above €44,000 per annum, you receive 40% tax relief
You can also benefit from:
Tax-free investment growth inside the pension
A tax-free lump sum at retirement (up to 25% of your fund, subject to limits)
Pensions for self-employed
If you’re self-employed or a company director, pensions are especially important, since you don’t have access to an employer scheme.
Benefits include:
Full control over contributions
High tax-relief limits
Company contributions for directors (up to Revenue limits)
Speak to us for a tailored pension plan that suits your business and future goals.
how to invest your pension
Your pension isn’t just a savings plan — it’s an investment fund designed to grow your retirement income over time. How you choose to invest it will significantly influence how much you’ll have when you retire, and how comfortably you’ll live in retirement.
Key Investment Considerations:
Time Horizon
The longer your time to retirement, the more growth-oriented your investments can be (e.g., equities). As retirement approaches, your strategy should typically become more conservative.Risk Profile
Choose from risk-rated funds (e.g., cautious, balanced, adventurous) based on your comfort level and goals.Fund Choices
Most providers offer:Equity funds (Irish, European, Global, US, etc.)
Multi-asset diversified funds
Property funds
Bond funds
ESG/Sustainable options
Default vs Custom Strategy
Many people are enrolled into a default fund. It’s important to review and ensure it aligns with your goals.Lifestyle Strategies
These adjust your investment automatically over time, becoming more conservative as you near retirement.
Your drawdown plan matters
How you invest your pension should also reflect how you plan to withdraw income in retirement.
If you plan to use an ARF, your money stays invested, so you need a strategy that balances income, growth, and risk.
If you plan to buy an annuity, you may want to move your pension into more stable assets (like bonds) in the years before retirement to protect its value.
Previous pensions - leaving service options:
Leave the pension where it is
Transfer it to your new employer’s scheme (pension consolidation)
Transfer to a personal retirement bond (also known as a buyout bond)
personal retirement bond / buy-out bond
Individually Owned: The bond is set up in your name—you control it, not your ex-employer.
Choice of Provider & Investment: You choose where and how to invest the funds, often from a wide range of funds and strategies.
No Further Contributions: It’s a once-off transfer—unlike personal pensions, you don’t continue contributing to a PRB.
Pros and Cons:
Leaving it where it is: May be fine if charges are low and performance is strong, but can be harder to manage.
Consolidation: Convenient and simplifies admin as everything is in one place, but it can reduce your ability to invest and encash separately during phased retirement.
Transfer to a buyout bond: Offers full personal control and investment flexibility, ideal if you want to manage your own strategy or separate this fund from others.
Professional advice is key to help you choose the right path, considering charges, performance, access, and your long-term goals.
post-retirement options: aRF vs annuity
After taking your tax-free lump sum, you need to decide what to do with the balance of your pension fund.
approved retirement fund (ARF)
Funds remain invested – expect market volatility
Must withdraw 4% per year from age 61 (rising to 5% from age 71)
Offers estate planning benefits – remaining funds can be passed to family
Risk of "bombing out" – if returns are poor or withdrawals too high, fund may not last
Suitable if you want flexibility and are comfortable managing investment risk
annuity
Provides a fixed income for life
No volatility or bomb-out risk
Risk lies with provider insolvency
May include options like:
Spouse’s pension/reversion
Guarantee periods (e.g. 10 years)
Index linking to protect from inflation
Can include estate planning features, e.g. passing to a partner
Provider will consider your health when setting income level – poor health may mean higher income
Key consideration: how long it takes to recover your initial investment