Self-Employed

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Self-Employed

There are c. 350,000 individuals working for themselves in Ireland today. If you are one of them, being self-employed means you probably lead a busy life and putting in place plans for a pension may not be at the top of your priority list.

However, the benefits of a pension plan with regular contributions, reviews and amendments should not be overlooked. Let’s be honest, if you don’t take up the mantle of setting up a pension for yourself, no-one else will on your behalf.

Can you afford to rely on the state pension alone?

Currently the state pension is €243.30 per week in Ireland. Is that enough for you & any dependents to get by on?

Assuming you would like to have more income in place than the state pension when you retire, what are the main points to consider when you are looking to set up a pension for yourself?

You have two main choices of pension when self-employed – a Personal Retirement Savings Account (PRSA) or a personal pension plan.

Opting for a PRSA, gives you a further choice – do you want to opt for a standard PRSA or a non-standard PRSA:

  • With a standard PRSA, you won’t be charged more than a 1pc annual fund management charge (charged by the pension company for the management of your pension fund) and the contribution charge (charged as a percentage of every contribution you make) cannot be any higher than 5pc.
  • With a personal pension plan or a non-standard PRSA, the charges can be higher or lower (depending on the management company) but you have a greater choice of investment funds in which to put your money

Which one should you choose? Well it very much depends on how certain you are of your contribution regularity. A non-standard PRSA would probably suit a self-employed individual who is likely to make regular pension contributions, whereas a standard PRSA is a better fit for people who want to pay into a pension but are not certain about the regularity of their income stream.

With nearly 350,000 self-employed individuals working for themselves, make sure you are one of those who puts in place appropriate security for your future and the future of your family.

Contact one of our pensions specialists today on 1890 300 303 and let them talk you through the options appropriate to you.

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Important Assumptions

For the purpose of determining the term over which pension contributions are made, we have assumed your birthday was exactly six months ago.

If your target retirement age is lower than the age at which the Social Welfare pension commences (age 68 if you are 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.

You are entitled to a full Social Welfare pension of €248.30 per week as at March 2019 which is assumed to increase by 2.5% per year.

You are saving for the difference between the Social Welfare pension and your target monthly income in retirement.

We have allowed for inflation of your target monthly income of 2.5% per annum between now and your retirement date.

Any other private pension provision you may have in place has not been taken into account.

Your monthly pension contribution increases by 2.5% each year up until your 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 4.2% per annum on your savings. This is not a forecast because the value of your investment may grow at a faster or slower rate than assumed and the value of your investment may be expected to fall from time to time as well as rise.

On retirement you purchase an annuity which escalates at 1.5% each year, has a 5-year guarantee and is payable monthly in advance. The annuity rate assumes a post retirement interest rate of 2% 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.

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