The best – or at least the most sanity-saving – advice for anyone considering having a quick gander at how their pension pot is doing so right now might best be described as the anti-Nike.
Just don’t do it.
We’re not advocating long-term ignorance but, given the level of uncertainty and stock market volatility caused by Donald Trump’s tariffs in recent weeks, there’s probably little to be gained from a forensic assessment of where the finances of the “future you” stand right now.
Equity markets have been all over the shop, to put it mildly. They tanked when the world was told Trump was not for turning on tariffs and surged when he turned and fell when the scale of the economic conflict with China became clear and then bounced after another U-turn as key electronics and phones coming from the east were exempted from tariffs of almost 150 per cent.
As it stands, no one – including, we suspect, the White House – knows what the road ahead might look like or what impact the road’s twists and turns might have on our pensions.
But there is no need to panic. Yet.
[ What Trump tariff turmoil means for your savings and pensionOpens in new window ]
Markets are cyclical, and while we can’t say what crisis will cause the next upheaval, we know they come and go and come and go again.
In recent decades we have seen the dotcom bubble bursting, 9/11, the banking collapse and the property crash, the chaotic years of Trump 1.0, Covid-19, war in Ukraine and the chaotic first weeks of Trump 2.0 all causing serious upheaval and giving pension fund managers and those on the cusp of retiring sleepless nights.
[ More than one in five Irish adults do not have a pensionOpens in new window ]
Nick Charalambous, managing director of Alpha Wealth, has “spent the best part of a week having conversations with my clients about the state of their pensions. The first thing I say is: it’s best not to speculate. We can’t predict what’s going to happen even in a day never mind from week to week.”
He’s been hearing from two types of people of late. “Those who think now is a great time to invest and those who say ‘move into cash’. In my opinion, neither is correct.”
His advice “is to take the noise away. Anyone with a relatively well diversified fund over the last five years will have performed quite well. If they’d left the planet five years ago and arrived today not knowing what happened over the last two weeks, they’d feel fairly comfortable about their position.”
But while many managed funds have performed well over the past five years – some are up by about 50 per cent – 2025 has been a different story, with some funds losing close to 10 per cent of their value so far.
People who have years to go before they retire can probably ride out this storm, while people looking to retire sooner rather than later should be insulated to at least some degree with much of their pension pot now in the form of cash and fixed-income investments such as bonds, says Charalambous.
He understands how people are spooked but says it is worth remembering that “things like this have happened before. This is not the most extreme event that we’ve witnessed over the last century”.
How much do I need?
The basic rule of thumb is that “adequate” gross retirement income is about 50 per cent of gross pre-retirement income. So if you were on €80,000 at retirement, you need a pension income of €40,000.
How do you get there? The State pension is worth about €15,000 a year, which leaves a shortfall of €25,000. To get to that, a fairly sizeable fund is needed.
Charalambous says “somewhere between €400,000 and €600,000 is a suitable pension pot for most individuals”.
The State pension aggregated over an expected lifetime is worth about €250,000 so if you want to bring it up to €600,000, you will need €350,000.
To get to that point, someone who starts saving at 25 will need to put aside about €300 gross per month. With tax relief at the top rate, that actually costs you only €164.
If they start at 35, they need to save about €500 a month before tax, while at 45 the monthly gross savings required come in at close to €1,000.
“There’s no point in saying to somebody you should be paying more into your pension when they’ve got other financial obligations,” says Charalambous. “It’s all about trying to find the right balance.”
Tax benefits
Saving for a pension gives a triple bounce when it comes to tax. There is the tax break on contributions and on the investment growth, and a 25 per cent tax-free lump sum at retirement.
On contributions, you can receive up to 40 per cent income tax relief (after USC and PRSI are paid) if you are a higher-rate taxpayer.
Deposits in banks, credit unions and the rest charge Dirt at 33 per cent, while investment growth of the fund over 30-40 years or more is tax-free and compound interest also performs its magic.
And, at retirement, members of a defined-contribution pension scheme are entitled to take 25 per cent of their fund tax-free.
The returns depend on where you invest the money and when it is cashed in but, over the past 30 years, the average actively managed pension fund has returned about 8 per cent per year.
Someone who saved €250 per month over three decades would have saved close to €100,000, and their total pot would be more than €500,000 after charges, or almost six times your money back.
When should I start?
Yesterday. Almost half of pension holders wish they had started their pension earlier, while a fifth wish they had paid more sooner, according to a survey published last week by insurance broker Gallagher.
A fifth of Irish adults say they don’t have a pension at all, with women more likely than men to be in this group.
[ Women, take control to ensure you have enough income in retirementOpens in new window ]
The survey also examined attitudes around the upcoming auto-enrolment (AE) mandatory workplace pension scheme. It found that 71 per cent of people believe the Government should offer workers financial advice in advance of the roll-out of the scheme so that people are aware of what’s involved.
Auto-enrolment will capture up to 800,000 workers between the ages of 23 and 60 who are earning more than €20,000 and are not yet part of a pension plan.
[ Q&A: What is pension auto-enrolment and what does the latest delay mean?Opens in new window ]
The research suggests that financial literacy is a problem, with three in 10 pension holders admitting they did not recognise the importance of early contributions, and many citing a lack of understanding of pensions as the reason for their delayed savings.
Jonathan Roche-Kelly, of Gallagher, says the research “shines a light on the fact that there is a critical gap in Ireland’s retirement planning landscape, and many people lack awareness around the importance of pension contributions”.
He says the “fundamental issue at play here is that too many people fail to grasp the long-term impact of delaying pension savings until it’s too late”.
He believes “starting a pension early is one of the shrewdest financial moves you’ll ever make and could help ensure you are financially set for retirement”.
He says the sooner people start saving into a pension, the more prepared they will be for retirement – and the more benefit they can gain from the available pension tax reliefs.
“You’ll have a much better chance of achieving the pension you’re hoping for in retirement – and in turn, the standard of living you want at that stage of your life – if you start a pension early. Even contributing small amounts into a pension in the early part of your career can help build a significant pot at retirement – particularly when the benefits of compound investment growth are taken into account.”
And when will I retire?
It might not be 65, the age settled on by Bismarck in the 1860s in an effort to ease social unrest by showing himself to be socially progressive. He didn’t want to pay too much for pensions, however, and with the average German dying well before 65, he was pretty sure most people would never see the money.
But life expectancy – at least in the wealthy West, has increased dramatically over the past 150 years and, today, Irish women can reasonably expect to live beyond 84 while – all things being equal – men will live until they hit 81. That is a lot of years of retirement income.
Retiring before 65 is a pipe dream for most people. According to a recent survey by Royal London Ireland, 53 per cent expect retire at either 65 or 66, but one in five say it will be 70 before they can afford to retire.
“The concept of Fire (Financial Independence Retire Early) has gained momentum in recent years, with some people tempted by the notion of retiring early,” says Mark Reilly, of Royal London Ireland.
But in truth very few people believe they’ll be able to retire before the age of 55, and “for most people, their present financial circumstances mean they would be unable to retire before the ages of 65 or 66. It is interesting that women are slightly more likely than men to see themselves retiring at 70” .
That is because the gender pension gap, which sees woman’s pensions amounting on average to 35 per cent less than a man’s, putting them in a more financially perilous position, something the State would do well to address meaningfully sooner rather than later.
