Ten tips for top pensions

Know when to take a risk and when to play it safe


1 Early rises
You have heard it before but we’ll not tire of saying it: you need to start a pension, and the earlier you do it the less painful it will be. Putting €100 a month into your pension pot when you start your first job in your early 20s (hopefully) will save you having to put four times that amount away if you start when you’re 40.

2 Play risk
When you are in your 20s and 30s you can afford to gamble with your pension pot. We’re not suggesting you invest in a blackjack player in Vegas but chose funds that invest in more high-risk stocks. You have 50 years of investment ahead of you when you are in your 20s, which is at least five recessions and five booms.

3 Skip risk
As you get older de-risk, so that by the time you are in your 60s your pension pot should be safe as houses. (Not actual houses – they’re not at all safe.)

4 AVCs are your friend
If you are starting out and have no serious drains on your finances other than nightclubs and fancy shoes, put a few bob into Additional Voluntary Contributions. They will grow your pension pot fast and give you greater control and independence from pension shocks.

5 Don’t panic
If, like more than 50 per cent of the population, you don’t have a private pension, don’t panic. It is never too late. And you will be grateful for whatever you put aside.

6 Watch your fees
A report on pension charges published last year by the Department of Social Protection measured charges in terms of “reduction in yield to maturity” of the investment. It found that disclosed charges vary from 0.9 per cent to 3.08 per cent across the types of pensions it considered.

The impact of charges at those levels on your final fund is between 5 per cent and 28 per cent.

7 Stay away
The Government is making moves to change the rules in order to allow people to tap into their pension funds midway through if their financial circumstances change. Do not do this even if the law changes. You will regret it when you get older.

8 Day to day
Pension savings should be considered just another unavoidable outgoing and not an additional luxury. Rank it alongside the mortgage, food, clothes or electricity.

9 Keep tabs
Check your pension plan frequently – not every day, but at least once a year. Regular checks will help you to make sure it is working for you and put you in a better position to make any adjustments. How disappointing would it be to ignore your pension payments for 30 years only to find out that they were far too high (or, more realistically, far too low).

10 Mix it up
Don’t just decide on a sum you’re comfortable putting into it and leave it at that. Change the payment amount as your life circumstances change.

If you get a pay rise you can increase it, it you have children you can reduce it (but only slightly). And if you manage to pay off your mortgage while still at work, put all that money into your pension plan, you’ll thank us when you retire if you do.