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How much should I be saving from take-home pay each month?​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

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Additional voluntary contributions to your pension can make all the difference

Additional voluntary contributions to your pension can make all the difference

Additional voluntary contributions to your pension can make all the difference

Q I try to save on and off but I am never sure how I should be putting aside each month. Ideally, how much of my take-home income should I be saving?

The best practice suggests you should save 20pc of your take-home pay. This number can include paying into a pension, savings or a child’s education and regular savings also, according to Frank Conway, founder of financial wellbeing provider Moneywhizz and a qualified financial adviser. But if you are finding finances tight, he advises that you should try to save a little each month. If you are saving into a pension, keep it going, especially if it’s a work-sponsored one, Mr Conway says.

Q I am in the midst of moving house. I’ve cancelled my old home insurance policy and am in the process of setting up a new one. I’m a bit confused however about how to calculate the sum to insure for. I don’t want to end up under or overvaluing when factoring in my contents for valuation. Is there a good way to go about this?

It’s prudent to be aware of the impact of over or under-valuing your home insurance policy. Over-valuing your home can result in you paying unnecessarily high premiums, while the opposite could leave you exposed financially if you had to make a claim, according to the manager at Insuremyhouse.ie Deirdre McCarthy. She recommends trying the calculator on the Society of Chartered Surveyors Ireland website. This will provide a useful indication of the rebuild cost of your property.

From there, consider your contents value. A good approach to this is to go through each room in your home and assess the value of the contents you wish to insure, Ms McCarthy said.

You should just focus on the items you would be taking with you if you were moving to a new house. This would include your personal possessions such as clothes, jewellery, art, books, etc. You would also consider your furniture, such as beds, wardrobes and couches. Also assess your electrical goods such as devices, entertainment systems, and your white goods.

Consider your valuation from the perspective of how much it would cost to replace the contents of each room. Insurance premiums are in flux at the moment given the impact of the pandemic, and there’s strong competition in the market, she said. Therefore, it’s very worthwhile to do a little research, or contact a good broker, in choosing a new provider as you could stand to make good savings on your premium.

Q I am 34 and have been signed up to my employer’s occupational pension scheme for over three years. I pay in 5pc of my salary and my employer also contributes 5pc. I thought that was the maximum I could put into my pension but heard recently, I could contribute more. Is this true?

The answer is yes, you can contribute more into your pension, according to Mr Conway of Moneywhizz. He said it needs to be acknowledged that you are already doing well. It can be a common assumption that where someone takes the ‘maximum contribution’ that an employer will match to the employee’s own pension contribution, that this is job done and there is not more room for contributions.

However, there is a lot more scope. As you are age 34, you can actually contribute up to 20pc of your earnings, or net relevant earnings, into a pension and avail of the generous tax relief that comes with it, Mr Conway said. And in case you are wondering how the tax relief works, don’t worry, you don’t have to do anything more than make the contribution. The tax relief aspect of your pension contribution is managed at source which means that it is managed directly from payroll. Also, if you want to make some extra contributions into your pension, the mechanism through which you can do this is called an additional voluntary contribution, or AVC, as it is referred to in the pension industry. With an AVC, you can still avail of the very generous tax relief that comes with pensions.

The AVC contributions also grow tax free and this is perhaps the greatest benefit. he said. So, if you have some extra income and you are looking to put it to work, the AVC option might be just the perfect solution for you and your long-term financial wellbeing too, Mr Conway added.

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