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Cannot afford a pension? Start small to reap the benefits of compounding.

If you think you can’t afford to invest in a pension, you are not alone.

The impact of mortgage and car repayments, personal credit and price hikes on a range of commodities from electricity to food, many people feel they simply don’t have the financial means to invest in a pension scheme.

Recent research from Royal London highlighted that 43% of people in Ireland said they couldn’t afford to save for retirement.

Another 17% said they planned to rely on the State pension, and that it would be enough to cover their needs.

Further research from Age Action also revealed that 40% of workers aged between 20 and 69 have no occupational pension coverage other than the State pension, while many employers do not offer a company pension scheme.

As a result, more than 1 in 10 people are expected to be at risk of poverty in their older years.

You can’t afford not to save for a pension

If you think you can’t afford to save for a pension, the reality is, you can’t afford not to.

The State pension is unlikely to exist in its current form in years to come.

Due to the ageing populating and decreasing number workers, there will simply not be enough PRSI contributions to find the State pension as it is today.

Further, the government’s auto-enrolment scheme, designed to address the lack of pension savings amongst private sector workers, has been delayed and now looks unlikely for 2022.

Retirement might seem some way off, and it may seem you have plenty of time to worry about your pension, but unless you make regular savings a priority, you too could be looking at the very real potential of living in poverty as you get older.

The earlier you start saving for your pension, the less you need to contribute

If you have been putting off starting a pension due to financial limitations, it might surprise you to know that you don’t need all that much to get started.

The key is to start saving as soon as you can; the sooner you start, the less you need to invest compared to someone who starts saving after you and has to invest more to achieve the same outcome.

Pensions work on the basis of compound interest, which is paid on the interest that is attached to your principal amount of money.

Commonly this is known as earing interest on your interest. By reinvesting your interest payments, earnings are paid on both your principal sum and the interest you have accumulated.

Even though interest earnings may look relatively small in the short term, the longer you leave your pot to accrue, the bigger the impact you will notice in the longer term.

A pension scheme is also an effective way to manage the tax burden on your savings. Compared to general savings schemes, tax isn’t payable on your pension interest until you withdraw it. The longer you can leave your money in your pension to continue to accrue interest, the more you will have at the end.

Even a small pension contribution each month will make a difference

The earlier you start saving, the better off your pension will be, so it is worth developing a strategy to save even a small amount now, rather than waiting for a time in the future where you expect your outgoings to decrease.

Your Hennelly Finance advisor can help you devise a sound pension savings strategy and also recommend a variety of options including tax benefits that can help you boost your contributions.

For example, making an Additional Voluntary Contribution (AVC) prior to the tax deadline each year can help you make the most of your pension contributions by giving you tax back for a one-off, lump sum investment in your pension.

As tax relief is dependent on each individual situation, it is important you speak to an expert before taking action to ensure it is a suitable option for you.

Talk to Hennelly Finance to find out more about saving for your pension

There are many things in life that can wait, but saving for your retirement is not one of them.

The longer you wait to invest in a pension, the more likely you are to experience difficulty in your older years.

At Hennelly Finance, we can help by demonstrating just how easy it is to take advantage of compound interest and start a pension scheme today.

Get in touch with a member of our team on 091 670 123 to find out how a pension scheme can work for you and secure your future in retirement.


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Insurance Brokers & Financial Consultants,
Unit 3B, Tí Phuirséil,
Barna, Co. Galway.
H91 AF1W

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Appointments available outside normal working hours upon request.


Hennelly Financial Services Ltd. t/a Hennelly Finance & Health Insurance Shop is regulated by the Central Bank of Ireland. Directors H. Hennelly, R. Hennelly. Registered in Ireland, Company Reg No: 32727.
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