|Benefits of saving for retirement|
A pension is basically a long term investment plan, where you save regular amounts or lump sums (called ‘contributions’) to build up a retirement fund. There are a number of benefits to using a pension plan:
1. Tax relief
For every €100 of your income that you invest in a pension, the real cost to you after tax relief is less. It costs you:
If you are an employee, the real cost will be even lower as you can also get some tax relief on the income levy, PRSI (pay-related social insurance) and health levy payments. The maximum in earnings that you can take into account for pension tax relief is subject to Revenue limits. If you are a member of an employer pension plan, you don't have to pay tax on any contributions your employer makes.
The percentage of your income you can get tax relief on for pension purposes depends on your age. It increases as you get older.
3. Tax-free cash when you retire