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Maximise Your Tax Savings Before the Year-End by Contributing to Your Pension

As the end-of-year tax deadline approaches, one of the simplest and most effective ways to reduce your tax bill – whether you’re an employee or self-employed – is by contributing to your pension. This strategy not only lowers your tax burden but also helps build long-term savings for your retirement.

The Dual Benefits of Pension Contributions

Pensions are not just about retirement; they’re a powerful tool for immediate tax savings and future financial security. Many people mistakenly view pensions as something to think about later in life. However, contributing to your pension now has immediate rewards.

Significant Tax Relief for Higher-Rate Taxpayers

If you’re a higher-rate taxpayer, the tax relief on pension contributions is significant. For example, for every €100 you contribute to your pension, the government effectively gives you €40 back in tax relief.
It only costs you €60, offering a 66% tax advantage, It’s essentially free money.

Key Deadlines to Maximise Your Tax Relief

To benefit from this year’s tax relief, you need to act fast. Contributions must be made by October 31st to qualify, or by November 14th if you’re filing online through the Revenue Online Service (ROS). If you’re expecting a year-end bonus, consider investing it into your pension to maximise your tax benefits.

The Uncertain Future of the State Pension

Another reason to prioritise pension contributions is the uncertainty surrounding the future of the State Pension. Currently, the State Pension provides just over €14,400 per year, but future changes are likely. There’s no guarantee the State Pension will remain at this level in 20 or 30 years. The government could increase the retirement age or reduce payments. This makes it critical to take control of your financial future by starting or increasing your pension contributions today.

Tax-Free Growth and Long-Term Savings

In addition to immediate tax relief, pension contributions offer tax-free growth on your investment. This means the returns on your pension fund grow without being taxed, year after year, boosting your savings for the future. Moreover, when you retire, you can withdraw up to 25% of your pension as a tax-free lump sum, further enhancing its appeal as a long-term savings strategy.

Conclusion: A Smart Financial Decision Today for a Secure Tomorrow

Contributing to your pension is one of the most effective financial decisions you can make today. Not only does it reduce your current tax burden, but it also ensures a growing retirement fund and provides peace of mind about your financial future.

Don’t miss out on these powerful benefits – start contributing to your pension now to secure your financial future while saving on taxes this year.

Why do we recommend Zurich?

Have you considered starting a Zurich Savings Plan? Did you know the Banks, Credit Union, and post office offer 0% interest on your savings. We only recommend keeping your money in the Bank or Credit Union for your short term saving goals. Starting a savings plan with Zurich is a fantastic option because it gives you the opportunity to earn interest on your savings. This interest then compounds and once left alone for 3-5 years or more, you will see significant growth in your savings.

1. Consistency

Zurich have a great track record and have consistently performing funds. Zurich manage the funds and have our complete trust.

2. Ease of Access

With Zurich you have access to all your funds all the time and can withdraw them without facing an exit penalty which makes a Zurich Savings Plan extremely attractive in comparison to other savings plan which incur penalties when withdrawing funds.

3. Diversification

Zurich will invest in a diversified range of funds to minimize risk. It is an actively managed multi-asset fund with investments in equities, bonds, property and commodities.

The Alpha Savings & Investment Club

We highly recommend that you consider joining our savings & investment club. Our main objective is to make your money work harder for you. Whether it’s for saving monthly for a property, your kids, or your retirement. We can help take a step closer to financial freedom.

Why Join?

• Free savings & investment consultation on joining
• Can be started for as little as €100 per month
• Access to members only content & on-going advice and updates from advisors
• Join over 1,000 happy clients who are growing their savings in the Alpha Savings & Investment Club
• Access to well diversified funds with consistent long term track records.

Zurich Funds We Recommend

Prisma 4 Fund & Zurich Balanced Fund

We recommend two funds as part of our Savings & Investment Club. Both of these funds have performed exceptionally well over the last few years. The Zurich Prisma 4 Fund and the Balanced Fund are currently up 11% YTD.

Zurich Fund Performance

The days of interest rates on savings are coming to an end, so Irish investors may now have to look elsewhere and be willing to take on some degree of risk, writes Nick Charalambous.

The writing was on the wall for savers for some time.       

Bank of Ireland wrote to pension fund investors and trustees in the summer saying it was charging a negative interest rate for it holding their cash.

AIB has cut interest rates to zero for many personal savers, and Ulster Bank has announced charges for holding very large corporate deposits, as most other banks have already done.     

It was then only a matter of time which bank would start charging personal customers for holding large cash deposits. 

The market was watching who would make the first move, and surprisingly it was German digital bank N26 which announced late last month it would be the first in Ireland to charge negative interest rates for large deposits of €50,000 or more. 

For clarity, the interest charged will be on the balance over €50,000 and not on the full saving balance. 

Irish consumers have, to date, largely escaped being charged interest on their savings, despite the ECB negative interest rates.

The justification N26 gave is that it costs a negative rate of 0.5% for it to hold money with the ECB. 

It is essentially passing on this cost, it said. 

AIB has announced tentative plans to charge individuals holding very large deposits a negative interest next year, while EBS — which is part of the AIB Group — along with a number of credit unions has a cap on the savings it will accept from any individual.

Central Bank figures suggest household deposits have soared for households who kept have their jobs during the pandemic. 

However, there are still paths to be taken for people who have built up a sum of money and set aside, possibly funds that would normally have been spent on a foreign holiday and nights out.

But households face a risk to their savings in making some of these investment choices.     

The life assurance companies — including Aviva, Zurich, and New Ireland to name but a few — brought out options that would give savers at least some hope from their deposits.

These accounts offer, I think, a fairly generous amount of up to €250,000 with easy access to the money without penalty. 

They also offer what may be low-risk funds as well as the option of blending some of the savings into higher-risk funds, should the investor choose. 

These higher-risk funds include technology funds, such as a Nasdaq tracker, and funds offered by a number of brokers or banks.

Although I am not recommending any fund, the benefit of these accounts, in my opinion, is the diversification and flexibility they may provide.

However, it is very important to stress that they involve risk to your savings or deposits, in this time of huge uncertainty for the world’s Covid-19-hit economy.  

They are investments and not deposit accounts that involve risk, and we have all seen what has happened to supposedly low-risk investments during the last financial crisis 10 years ago.

Risk and reward go hand-in-hand for investors, so it is important for individuals to assess where they are on a scale of one to seven in accepting risk, which could involve losing a large chunk of your money.

At the bottom end of the scale, one is representative of deposit accounts with no risk and little reward in these times of zero interest rates. 

Seven on the scale represents the extremely high-risk investments, such as Asian equities that have the ability to grow or slump by huge amounts. 

Advisers normally suggest that investing money in the short term is not for building up nest eggs for your children when they are very young. That’s a long-term investment.

And there is never a one-size-fits-all solution.

I would also warn that there is a wide range of fees that banks and brokers will charge you for managing your money, and in some cases they can charge exorbitant fees that can eat into any supposed gains.       

At the bottom end of the scale, one is representative of deposit accounts with no risk and little reward in these times of zero interest rates. 

Seven on the scale represents the extremely high-risk investments, such as Asian equities that have the ability to grow or slump by huge amounts. 

Advisers normally suggest that investing money in the short term is not for building up nest eggs for your children when they are very young. That’s a long-term investment.

And there is never a one-size-fits-all solution.

I would also warn that there is a wide range of fees that banks and brokers will charge you for managing your money, and in some cases they can charge exorbitant fees that can eat into any supposed gains.       

The charges vary between no entry costs, but can climb to be as elevated as 5%, even before they charge you additional management costs that can range from 1% to 2% per annum. 

The charges vary between no entry costs, but can climb to be as elevated as 5%, even before they charge you additional management costs that can range from 1% to 2% per annum.