During your retirement in Ireland you will be able to rely on at least two sources of income: one is the State Pension and the other is your private pension, which you contribute to through your company's Workplace Pension scheme, with your employer contributing an additional amount on top as a benefit.
If your employer does not offer a pension scheme as a benefit, they are required by law to offer MyFutureFund, under which you contribute 1.5% of your salary, your employer contributes 1.5% and the government contributes 0.5% during the first three years. Over time, this contribution rate increases until you are contributing 6% per year.
Even considering these two retirement income routes in Ireland, you will probably not retire with the same level of income you have today, because the combined value of these two sources will not be enough.
This is especially true for Brazilians who moved to Ireland after the age of 35, as they will not have enough contribution years to receive the full State Pension.
Given this scenario, you have two viable options to plan your retirement.
Investments
Investing part of your salary today so it works for you. These investments can include buying shares in solid companies, building an ETF portfolio or even purchasing property to earn rental income.
This first option is valid for every Brazilian living in Ireland. However, there is an even better option to maximise the return on your investments.
Personal Pension – PRSA
This second option is better than the first for several reasons. First, the government has already recognised the public pension problem and, in response, created tax incentives for investing in a pension fund.
When you invest for retirement through a pension fund, you do not pay income tax (PAYE) on the amount contributed. In other words, you benefit from tax relief of 20% or 40%, depending on your annual salary.
On top of the income tax relief, investments inside a pension fund are exempt from taxes (Deemed Disposal, Exit Tax, DIRT, CGT). This second benefit boosts the return on your investments alongside compound interest. The third benefit is being able to withdraw 25% of your money, up to €200,000, completely tax-free.
In Ireland, there is nothing comparable to the benefits of investing through a pension fund when the goal is specifically retirement.
Retirement planning advice connects these different strategies to create a clear picture of your financial future.
What I will deliver to you in a retirement planning consultation
- how much you want to receive per month in the future;
- when you plan to retire;
- how much you have already accumulated;
- your current contributions;
- how much your employer contributes;
- your PRSI record;
- the State Pension you may be entitled to;
- investments and other assets;
- the time available to build your wealth.
This overview makes it possible to identify early on where adjustments may be needed.
Employer contributions can make a significant difference to the wealth you accumulate over the years.
That is why it is worth understanding exactly how your current pension works: how much you contribute, how much your employer contributes, which investments are available, what the costs are and what the projected outcome may be.
It is also important to review pensions from previous jobs. Many people accumulate different plans throughout their careers and stop keeping track of these funds after changing employers.
The time to plan is during your working life
Time is one of the most important factors in building wealth for retirement.
Starting earlier can provide a longer horizon for contributions and investment growth. For those already closer to retirement, planning can also help identify priorities, adjust contributions and organise the transition between accumulated wealth and future income.
There is no single strategy that suits everyone.
The right structure depends on your age, income, assets, existing pensions, goals and plans for the future.
In the consultation, we analyse your specific financial situation considering all the pillars described above.
The goal is to turn this information into a clearer strategy for the decisions you need to make today.