There are a few different financial instruments that you can invest in to prepare for your retirement and ensure a greater quality of life during that period. These pension options can be a compliment to the state's welfare pension, if you are eligible for state pension.
Personal Retirement Savings Account (PRSA)
Personal Retirement Savings Account (PRSA)
As the name reads, this is a personal plan that you can individually invest in to create a fund for your retirement. Your contributions will usually be tax deductible. A PRSA can be contracted at your initiative, or facilitated by your employer - note that this doesn't imply any employer contributions, they're only intermediaries to help you get such a product. In fact, in Ireland, employers must offer a PRSA as an option.
Occupational Pension Scheme
Occupational Pension Scheme
An occupational pension scheme (or a company pension scheme) is a pension fund set up by your employer whereby they have the option to contribute to your pension. The contribution is determined by your employer, and all employer contributions are tax-free. So if you're contributing to your pension plan, and your employer is also contributing, in most circumstances, it's all tax deductible. It's a win-win for your retirement fund.
There are two types of occupational pension schemes:
Defined Benefit (DB)
The employer contributes a specific amount of money towards the employees' pension - this is guaranteed. When the employee retires, pension income will be paid based on the employee's final salary and number of years of service with their employer. DB occupational pension schemes have become a rare offering by employers in the last number of years.
Defined Contribution (DC)
The employer and the employee contribute towards the employees' pension pot. Employers can choose to match employees' contributions up to a certain amount. Here are some benefits of this type of scheme:Your fees are likely to be lower mostly because there are more people on this scheme
The scheme is overseen by professional, qualified trustees independent of the provider
You can add money to your pension, and this is deducted from your gross pay, not your net pay, so it's tax-deductible
Your employer can choose to match the amount of money you put into your account (up to a certain point). For example, if you add 5% of your salary to your pension, your employer can choose to add another 5% on top of that into your savings. This is the pension scheme that most Kota customers select: the employer selects a maximum percentage of their employee's salary to contribute, so the employer and employee contribute in the same proportion up to that cap percentage.
DC is the pension scheme type offered by Kota. We work with Irish Life and they apply the contributions made to the EMPOWER Lifestyle Strategy. Your employer will add at least a 1% matching contribution to your pension. You can match this amount, or you can add more money to your pension depending on your personal goals.