Benefits Of Pension

Introduction

A pension is a regular payment made by the state to people of or above the official retirement age and to some widows and disabled people. Most people get a State Pension but this only provides for your basic needs. To make sure you have the standard of living you want in your retirement you will need to save in a pension scheme. Everyone needs money for their retirement, to support you and give you a decent standard of living. You may also need to support a partner or other members in your family. People are living more healthy and active lives after retirement so it is important to know where your income is coming from when you retire. Many older people live in poverty because they haven’t been able to save enough. The help offered

Money is put aside during your working life into a pension fund. When you reach retirement age, you get your pension to live off for the rest of your life. The amount you get will depend on how much you have saved. This is why it’s important to start a pension as soon as you can. There are several ways you can save for a pension. Your employer may offer a workplace pension scheme or you can take out a personal pension through an insurance company.

Benefits of pensions

Pension is one of the most tax-efficient ways to save for the long term, but the tax treatment of pensions depends on individual circumstances, and may be subject to change. Receiving the benefits of pensions start from the age of 66 and up to 25% of your pension fund can be taken as tax free cash. You can take your whole fund as cash in one go or as and when you need it, but the remaining 75% will be taxed at your marginal rate of income tax. Alternatively you can take an income direct from your pension fund or via an annuity.

There are many types of pensions from which you can choose from. They are:

• State Pension

• Occupational pension

It is also a contract between an individual and an authorised PRSA provider in the form of an investment account.

Who can take out a PRSA?

Every adult under the age of 75, whether they are employed, self-employed, homemakers, carers or un-employed may take out a PRSA. The legislation does not state a minimum age. The law that introduced PRSAs gives all “excluded employees” the right to contribute via payroll to a Standard PRSA set up by their employer. Excluded employees are:

• Employees who are not offered membership of an occupational pension scheme or

• Employees who are included in an occupational pension scheme for death-in-service benefits only, or

• Employees who are ineligible to join an occupational pension scheme and who will not become eligible to join the scheme for pension benefits within six months from the date they commenced employment, or

• Employees who do not have access to AVCs through their occupational pension