Q: I am 26, and working on a contract basis as a software engineer and making a decent wage. Most of my friends are obsessed with saving for a deposit for a house, but I have no interest in property. I am planning to work abroad for a while in my 30s. I am interested in saving some money for the future. Deposit rates are woeful, but I still have some money in the bank. I am also thinking about a pension, or am I jumping the gun, given my age?
A: There is definite wisdom in starting a pension in your 20s. Whatever small amount you start to save now will be invested over a long period of time, and you will benefit hugely from the effect of compound growth on your savings, according to the chief executive of the Irish Association of Pension Funds, Jerry Moriarty.
Many people do not realise the monetary benefits that pension saving in your 20s and early 30s can bring.
For example, if a person only saved for their pension for 10 years from 26 to 36, and then left the fund to grow with no additional contribution to age 65, the benefit would be greater at 65 than if they had saved for 30 years from 35 to 65. Bank deposit rates are indeed negligible at the moment, but it's always prudent to have some readily accessible savings.
The beauty of pension saving is that you can avail of a tax relief on your pension funds at your tax rate, so it is a financially sound move.
If you do move away, just remember to keep your pension fund details so you can locate them when you return.
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