PERHAPS the easiest way for self-employed people to set up a pension plan and save on tax is by taking out a standard PRSA (personal retirement savings account). PRSAs are not only for the self-employed but can be used as an investment medium for long-term retirement by employees, homemakers, carers and unemployed people.
The key attraction is that for every €100 you save into the plan for your own retirement, you will get back €59 from the taxman; so that €100 will really only cost you €41 (assuming you pay at the 41pc tax rate).
Saving is easy. Some people pay in a regular monthly amount, while others wait until they have completed their accounts and their accountant advises them how much, in one lump sum,they need to pay into their plan to maximise the saving on tax.
The other attraction of a standard PRSA is the low commission charges. Today, standard PRSAs have just two maximum charges — 5pc on all contributions to the plan and a 1pc annual management charge.
The 5pc is what pays the commission, so in these recessionary times you may be able to bag yourself a better bargain by haggling a lower charging structure with your intermediary.
Starting a standard PRSA is easy but not every life insurance company offers them. Those that do are: Ark Life, Canada Life, Danica Life, Eagle Star Zurich, Friends First, Hibernian Aviva, Irish Life and New Ireland.
Considerations for women
Currently, fewer women than men have independent access to a pension. There are many reasons for this. For example, two-thirds of women in the 40 to 60 age group find the time involved in looking after children restricts their ability to save for their retirement. It is unfair that some women will reach retirement age and discover they are not entitled to a state pension — a point pension policy must address.
Until that dream is realised, remember the biggest risk facing women in retirement planning is doing nothing. Any savings are better than none and the more you save into a pension plan the better.
Also within this 40 to 60 age group, 75pc are married and the average woman will outlive the average man. So a married woman should ensure that when her husband retires, his pension is set up on a joint-life basis that will provide a continuing income to her after the death of her husband. (Writes John Geraghty Irish Independent).
