How much should I contribute?
Retirement may be a long way off, and you probably have a lot of
calls on your income, so it can be difficult to know how much you
should be contributing to your pension scheme. While a simple
answer would be as much as possible, the first question to ask
yourself is how much can you afford to contribute at the moment?
While your pension scheme may have a minimum contribution you must
pay as a member, they are generally flexible on when and how you
make extra contributions (AVCs - see below).
You should remember that your pension scheme is
saving for retirement - it is not a general savings plan and you
can't cash it in for other reasons in the future. So you need to
save separately also, be it for weddings, houses, children or that
dream trip around the world (for more information on personal
savings and investments see our Personal
Financial Services pages).
Bearing in mind what you can afford to pay, our Pension
Calculator is a handy way to see how much you want to
save.
If you have access to InvescoOnline
you will also be able to look at more detailed personalised
projections for your pension.
What are Additional Voluntary Contributions
(AVCs)?
Additional Voluntary
Contributions (referred to as "AVCs") are simply extra
contributions that you can choose to pay as and when you like to
top up your retirement savings. The more AVCs you pay over your
lifetime the more you will have available for a comfortable
retirement.
And remember, you get tax-relief on your AVCs also, which means
the tax-man is helping you to save. Every €100 you contribute to
your pension will only cost you €59 or €80 depending on which tax
rate you pay.
In short, making AVCs to your pension scheme is one of the most
tax efficient ways of saving and investing.
Are there any limits on how much I can pay?
Yes, there are some limits depending on your age and salary but
these are still quite generous as shown in the table below. For
example, someone in their 40s can pay up to 25% of their taxable
earnings to their pension scheme in any tax year, and get full tax
relief on it - the limit includes all of your own contributions but
not the company's contributions, which can be paid in addition
(unless it is a group PRSA scheme).
There is an earnings cap that applies to high earners, so
tax-relief can't be claimed on any earnings above €115,000 a
year.
If you want more information on your company pension
scheme please contact your HR department or corporate@invesco.ie.
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