Types of Pensions
There are different pensions which you may be entitled to depending on your working life;
State Pension a. Contributory (SPC). This is based on your PRSI contributions (stamps) and is not means tested. b. Non-contributory. This is means tested and is for people who do not qualify for the SPC or who only qualify for a reduced SPC pension.
Private Pension
Defined Benefit (DB). These plans set out a specific pension that will be paid. Pension is linked to salary and years of service. Guaranteed as long as the scheme is fully funded. Many of these schemes are struggling to fund their future obligations. The Pension Authority’s 2019 Review identified 81 schemes that were in an aggregate deficit of €1.4 billion.
Defined Contribution (DC). This is an accumulation of the funds that make up an individuals’ pension pot. The Pension is linked to contributions made by both employer and individual. There are attractive tax advantages to encourage people save into a pension. DC Pensions are much more common nowadays.
The main difference between a defined benefit (DB) scheme and a defined contribution (DC) scheme is that the DB promises a specific income and the latter depends on factors such as the amount you pay into the pension and the fund's investment performance.
You will also need to consider what type of employment you have held:
Public sector
Employee
Sole trader/partnership
Director
This will all impact on your options to build up your pension during your career and also the options available to you on retirement.
Your financial adviser will help guide you through these options. Discover today what are your options by booking a short meeting.