Why you need a private pension

The State pension increased in the last Budget by €5 a week, which will bring it up to €248.30 a week or €12,911.60 a year. If you were to buy a this pension yourself from an insurance company, it would cost you €325,000. That’s a lot of money to accumulate yourself from a private pension. But you have to work a long time to get this pension and you only have to work longer before you get it.

When is the State pension payable

For those born before 1955, the State pension is payable from age 66 onwards. But that age has been extended for everyone else:

  1. Born between 1 January 1955 – 21 December 1960 – 67
  2. Born from 1 January 1961 onwards – 68

The government plan is that the State pension will be paid for the same amount of time for each generation base on mortality rates. As we are living longer (although not necessarily living healthier lifestyles), they will extend the start date of the State pension so each generations get paid the State pension for the same number years (on average).

Do you want to work that long?

If you don’t save for your own retirement, you will have no choice but to work until 68 at the earliest. For those in their 40’s now, I think you can expect to wait until 70 years of age to receive the State pension. If I am working at that age, I want to do it through choice, not because I have to.

I am lucky in that I work in an office and the financial planning industry hasn’t gone through massive changes over the years. What if you work in a physically demanding job or one that is going through massive technological changes over the last few years? You won’t be able to keep up with younger people with more energy and skills. And it can be pretty difficult for older people to get work in Ireland. What are you going to do then?

Even if you don’t accumulate a huge pension fund, isn’t it a good idea to accumulate some form of income that can at least bridge the gap between the time that you want to stop working and when you get the State pension?

Otherwise you are taking all the control out of your own hands.

Let me know what you think by dropping me an email to steven@bluewaterfp.ie