A pension is a savings plan which will provide you with an income in retirement. There are three different types of pension available – one is provided by the government, one may be provided by your employer and one which you can manage yourself.

The Government pension plan is funded from your Pay Related Social Insurance contributions. These contributions are taken from your earnings and once you reach the State Retirement age, currently 66, they will be given back to you in the form of the Contributory State pension. The weekly pension now is €233.30 for a single person. In 2021, the Pension Age will increase to 67 and in 2028, to 68.

The government pension contributions are not invested so the amount you will get at retirement will not depend upon investment performance over its lifetime.

An employer paid pension is funded by contributions made by both the employer and the member [employee]. It is usual for employers to match the contribution of employees up to a certain figure but an employee who may not have full service by retirement age can opt to increase their contributions through an Additional Voluntary Contribution [AVC].

At retirement, you can take a tax free sum equal to 1.5 times your final salary and use the balance to provide an annuity, a pension for life. Alternatively, you may take 25% of the accumulated pension fund and invest the balance in an Approved Retirement Fund.

Self-employed individuals and those whose employers do not provide a work place pension can contribute to a Personal Pension or a Personal Retirement Savings Account [PRSA] .

All of the above types of pension are invested in the stock market while you are making contributions. This is known as the accumulation period of retirement saving. The investments are chosen and managed either by the trustees of an employer paid pension or by an external fund manager. The aim is to steadily grow the pension pot in order to maximise the amount of money the individual has in retirement and provide an income for the rest of their life.