Question: My spouse and I are in our late 40s and have €80,000 in savings on deposit in the local credit union, which equates to about one year's take-home pay. We were saving about €300 a month but have been able to increase that to over €500 a month since the start of the lockdown. While we're both agreed on the merits of saving, I would like to switch to pension savings rather than to keep putting it in the credit union, whereas my husband would like to continue to put it in the credit union where he can "see it". Please advise.
Answer: It will depend on your own circumstances, but the general rule of thumb for savings is to first establish a rainy-day cash fund equal to about six months net income, in case you lose your job or jobs.
After that, your attention should turn to long-term pension savings, according to the CEO of the Irish Association of Pension Funds, Jerry Moriarty.
He says that at least one of you is likely to live for 20 to 25 years after retirement and the State pension is really only sufficient to ensure you don't live in poverty.
Pension saving is far more efficient than deposit savings as you get tax relief on your savings - 40pc based on your income, Mr Moriarty said.
So if you save €800 a month, the taxman will give you €320 back and it will only cost you €480 of your take-home pay.
This money will then grow tax free, unlike your deposit savings.
If your employer has a pension scheme you should join that as they will also pay into it, he added.
You are advised to get independent financial advice before making a decision on which pension to go with, assuming that you can persuade your husband.
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