The single most efficient way of saving for the future is to have a pension plan in place. Contributions to a plan are tax free, up to certain limits, and as they are very long-term savings can build to a reasonable post-retirement income.

Ideally, everyone should start saving towards a pension as soon as they start earning an income.

While it might be hard to convince a 25-year old to start saving for when they turn 65, the earlier money is put into the pot, the bigger the pot will be.

Additionally, starting earlier means you will have to save less each month. For example, putting €400 of your pre-tax per month income into a pension from the age of 25 would lead to a pension pot of more than €250,000.

If you’re starting at 45, you would need to put in €870 per month to reach the same total. For many workers their employer will also make contributions to their pension as a work-related benefit.

If you are an employee, it is important to remember that if you leave your job within less than two years your employer can claim back the contributions they have made on your behalf.

There are limits to how much of your income you can spend tax-free on pension contributions, based on a percentage of your income and your age, rising from 15% if you’re under 30 to 40% if you are over 60.

There is a cap set at €115,000 per year, or a lifetime cap of €2m.

Auto-enrolment

There is a very important change coming to pensions legislation from the start of 2025, and that is that all employees of a company have to be automatically enrolled in a pension scheme.

This legislation is very important for any farmers who have set their operation up as a company and put themselves down as an employee.

If they pay themselves a wage of more than €20,000 per annum then they will have to also enrol themselves in a pension plan. If there are other employees on the farm, they too will have to be enrolled in a pension.

According to the legislation, any new employee will have to be enrolled in the pension plan from the very first day of their employment. If you are an employer (even if it is only of yourself) it is important to understand the implications of this legislative change, so definitely worth getting some financial advice ahead of the scheduled January 1 2025 launch of the scheme.

State pension

Whether you have a private pension or not, you will still qualify for a State pension, the size of which will depend on how many PRSI contributions you make in your lifetime.

If you do not have enough PRSI contributions to qualify for a contributory pension, you may qualify for non-contributory pension, but this is means tested and takes into account both your other income and the capital value of your assets.

The size of a State contributory pension depends on the number of lifetime PRSI contributions you have made. The maximum rate is €277.30 per week, and while it is not means tested, it does count as taxable income.

Currently, you will qualify for the State pension once you turn 66. There had been Government plans to raise that age to 68 by 2028, but that has been postponed for now.

With the population currently ageing, and people living for longer, it is certain that this particularly political nettle will have to be grasped again in the coming years.