This working life: Time out of work means money out of your pension
Job sharing, unpaid parental leave and reduced hours may be attractive ways to improve work-life balance, but they must be considered when planning for retirement
“You can’t get the time back.” This is what I say to my clients, and indeed my friends, when they are considering reducing their hours of work when they have children.
Since the start of the pandemic, we have seen our clients prioritise what’s important to them in terms of work-life balance. They want the option of working from home and not sitting in traffic feeling stressed.
Employers are offering more and more flexibility to their employees in the form of job-share, reduced working week, unpaid parental leave and indeed, term-time. If you can financially afford to do this, it can be a benefit well worth taking advantage of.
However, there is a catch if you don’t allow for this when planning for retirement. Any time you take off while working impacts your service. For example, if you are working a four-day week for five years, you will lose one year of service.
Work half-time for ten years? That ten years’ service is now reduced to five, and that will reduce your pension unless you take action.
According to the National Women’s Council, even though over 50 per cent of women are now active in the labour force, they are far less likely to have pensions than men – and the pensions they do have are likely to be lower in value.
A trend our financial planners have noticed lately is more and more fathers availing of flexible working conditions, which is very encouraging. But what should working parents/potential job-sharers do if they have a feeling their reduced working hours are going to have an impact on their pension? Here are some tips.
Plan before you have a family The earlier you take action around your pension, the better. For every four years you delay paying into a pension, it will double the cost of building up your target fund.
When I meet young professional clients in their 20s I often advise them to start building up an extra pension in advance of buying a house, getting a mortgage and indeed having their family.
You can really break the back of what you will need to bridge any future gaps when you have relatively few commitments and outgoings. When you have lots of financial commitments in your 30s like mortgages and childcare, paying extra money for a pension might not always be an option.
Clients are often amazed that they have managed to build up an extra €30,000 in a relatively pain-free fashion during their 20s. This can give them plenty of flexibility and options when it comes to reducing hours in the future.
Make an additional voluntary contribution (AVC) To compensate for years missed towards your pension, you can opt to pay more into an AVC scheme at any stage in your career, provided you already have an occupational pension scheme with your employer.
The great thing is that the government helps pay for it. If you are in the high rate of tax, putting €100 into your pension will cost you only €60 and the tax man picks up the rest of the bill. AVCs are flexible, so you can pay as much or as little as you want within limits, and you can take breaks if you need to.
The devil is in the detail Be sure your financial planner does a risk questionnaire with you and puts you in a pension fund that suits your appetite for risk.
All pensions vehicles have charges. Insist that your planner explain them to you in a clear and transparent fashion, and that you are comfortable with them.
While the tax relief is very favourable at present, it may not always be the case. So make hay while the sun shines and don’t lose out on your year-on-year entitlements.
Pensions don’t die with you. And while we always hope you enjoy a long and healthy retirement, if – god forbid – you don’t make it, your pot is transferred to your estate.
Review your plan We love to see our clients thinking about their goals for the future, and putting plans in place to achieve these. However, you need to review these plans, as things can and will change. We recommend a review every 12 to 18 months for those under 50.
Once you are on the home stretch towards retirement, review at least every 12 months. As you get older and your salary increases, you can pay more in as per Revenue rules. You will also need to see where your money is invested, as most clients like their plan to de-risk as they approach retirement age.
They key message is to sit down with a financial planner with all the above in mind and see firstly if you need to do anything for your retirement – and if so, what your options are.
Claire Hanrahan is CEO of Irish Pensions & Finance, ipf.ie
Featured in the Sunday Business Post 27/11/2022
Claire, who holds a BA in International Business and an MBS in Marketing, will lead IPF’s team of 38 financial advisers at the company’s headquarters in Clonee, Co. Meath. She will be supported by a newly established senior management team including Carol Crahan, who takes over the role of Chief Operations Office and Blaithin Finn, Chief Financial Officer.
“I’m really looking forward to taking on this role, particularly at this very interesting time in the industry with the recent changes to the state pension regime. I’m hugely grateful to Owen and the wider managerial team for their support and guidance during my years with IPF. I’m committed to continuing the policy of growing and nurturing our fantastic team of advisers as they guide our clients through these important financial decisions. I’m excited to take IPF through this next chapter.”
We wish Claire the best of luck in her role and look forward to working with her in the future.
It has now been 6 months since we launched our Service Centre, a dedicated phone line service which gives clients the opportunity to have their queries answered instantly by a Financial Advisor. No need for an appointment and no irritating hold music!
Over the duration of this 6 months, our Advisors have taken over 1,000 calls from clients with varying queries in relation to their financial plans.
Some of the most common queries we've had are;
To discuss your Financial Plan with a Qualified Financial Advisor, you can call our Service Centre, Monday-Friday 09:00 - 17:30 on 01 8298500. We look forward to hearing from you.
IPF staff recently took part in a challenge to complete 10 million steps in 4 weeks, and we are delighted to confirm that we smashed that target, and then some!!
The aim of the challenge was to not only get us all moving, but to raise money for two very worthy causes while we did it. To date, €2,280 has been raised for the Irish Cancer Society and St Francis Hospice.
The 4 weeks culminated in a 13km hike of Howth Head on Saturday 26th to give us a helping push over that 10 million finish line!
Thank you to IPF Wellness Officer Michelle Farrelly for organising and to all those who participated and donated. Keep stepping!
Our donation link will remain open until 19th Aug 2022 so keep the donations coming! www.idonate.ie/IPF10MillionStepsforJuly
We are delighted to introduce our new Household Financial Planning service to our members.
We have found that our clients and their spouses often benefit from having a combined financial review, in order to get an overall picture of their financial objectives as a family.
We can now look at your household as a whole in order to maximise your overall financial position to your best advantage.
To do this, we engage in a four-step process;
As part of our Monthly Offers for 2022, those who book their household review in before the 5th of August will be entered in a draw for a €350 voucher for Ireland's Blue Book.
To book your Household Financial Planning review, go to:
Irish Pensions and Finance staff took on the Garda AFC recently in a football match in aid of St Michaels House in Westmanstown Sports Centre.
The IPF lads put up a brave fight but were outrun in the end by the impressive Gardai!
A great evening was had by all though with some great support from the sidelines! Looking forward to next year already!
James Burke, Anthony Dwyer and Grace Doyle from St Michaels House, presented with donation by Owen Dwyer, IPF, Patrick McElroy from An Garda Siochana and Neil McGroarty, IPF
Irish people are living longer in retirement, but how can you make sure your finances reflect that?
There is no reason why any of us should approach retirement with anything other than a positive outlook. The average life expectancy in Ireland has risen from 69.8 in 1960 to 82.3 in 2019*, meaning most of us will live longer and healthier lives in retirement. But for many retirement can be a gloomy prospect full of financial worries, not to mention the fear of ill-health or death. No matter what your personal outlook or financial position you can improve your retirement by taking some simple steps:
Managing Director & Founder Owen Dwyer