Why you should start a pension
HOW will putting money aside for the future save you money now?
This is a question Mr Moriarty answers on a daily basis - unsurprisingly, it doesn't make a lot of sense to people that they can save money by joining an employer's pension scheme.
When you join an employer's scheme they will pay into it. Not joining is like turning down extra pay. And often, they will increase how much they pay in if you increase what you pay.
You also get tax relief at your marginal rate of tax - what this means is that if you are on the higher tax bracket and you pay €100 into your pension, your salary will actually only reduce by €60 with the other €40 being provided by the Government.
In many workplaces now, employers match the pension contributions of employees, so if that were to happen in this instance, then €200 would be invested into your pension - but would only cost you €60.
Any investment returns are also free of tax. At retirement you can take some of your savings as tax-free cash and the rest is taxed as income.
Once you have been in a scheme for two years, you can take the value of your and your employer's contributions with you if you change employer.
So aside from the savings you can make, why do you need to start a pension?
• Many people think the state pension will be enough, but it is designed only to be sufficient to keep you out of poverty. Could you live on €233 a week now? Even without a mortgage and other debt that you may hope to have cleared by the time you retire, €233 will not get you very far. And it is likely that more and more people will be renting at retirement age.
• Ireland is facing a ticking time bomb when it comes to pensions - we have an ageing population and rely on current taxes to pay pensions, which means that when people retire in 30 or 40 years from now, there's a good chance the Government will no longer be even able to pay the state pension at current levels. Already the age at which it is paid has changed from 65 and will be 68 in 2028. It is also harder to qualify for the full state pension of €233 per week.
• We are all living longer which is great! Half of all men aged 44 today will live to age 86 and women to age 87. One-third of those men will live to age 91 and women to age 93. That is a long time to ensure you have adequate income. So, if your employer does have a pension scheme, you should join it and ensure you get the maximum contribution possible from them.