If you are considering starting a pension plan, then there are some questions that you will need to consider, such as:
- What level of income do I want per annum when I retire?
- How much can I comfortably afford to contribute per month/year during my working years?
- What timescale will I need to set to meet my objectives?
It is up to the individual pension plan holder to determine how much money they will need in order to live the lifestyle that they hope to have once they retire. The first consideration should be to estimate how much income is needed per year of retirement.
Subsequently, after working out a rough estimate regarding your financial requirements, the next step is to consider the amount of money you are currently expecting to have once you retire.
For most people, estimating the value of their state pension entitlement is the first place to start. For people retiring in 2009, when it comes to pensions in Ireland, the annual state provision is €11,976 p.a.
After you have estimated your state pension entitlement, you will then have to add this figure to any pensions you have in place with any other pension providers. Once you have these two figures (i.e. the amount you need to retire on and the amount you can so far expect to receive), you must then work out the shortfall between what you need and what you have.
Because the rate of projected growth on pension funds is hard to predict, you may need to consult with your pension provider in order to discuss what amounts you would like to contribute, and also the length of time you have to contribute. This will help you to manage to cover the shortfall between the amount you have and the amount you need. Although your pension provider will not be able to guarantee a final figure, they can provide you with an illustration which will outline a projected fund value based on a specific growth rate.
The important thing to remember is the sooner you start your pension, the sooner you will start to reap the main benefits associated with them.
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