Introduction to pensions
A pension is a long-term savings plan that you can use to build up a fund to give you pension payments when you retire from work. You can get tax relief when you pay into your pension.
There are different types of pensions:
- Occupational pensions are provided by your employer
- Personal pensions, also known as private pensions, are provided by a life assurance or investment provider
For information about social welfare pensions, read about income supports for older people.
An occupational pension is a pension provided by your employer. They are also known as company or employers’ pension plans. Occupational pension schemes provide a regular income after retirement. Some also give you a lump sum payment when you retire.
In a defined contribution scheme, the contributions you make are set and the benefits you get depend on the amount of the contributions you make.
In a defined benefit scheme, the benefit you are entitled to is set in advance. It could, for example, be linked to your length of service.
You may prefer not to join an occupational pension scheme, or you may not have the option to (for example, if you are self-employed or your employer does not offer such a scheme). In these cases, you can save for retirement by choosing a different type of pension plan. These are normally known as personal pension plans or private pension plans and are managed by a life assurance or investment company.
The two main types of personal pension plan are called RAC and PRSA:
- Retirement Annuity Contract (RAC) is the formal name for what is commonly called a personal pension and is a type of insurance contract
- A Personal Retirement Savings Account (PRSA) is like an investment account that you use to save for your retirement
If your employer offers a PRSA rather than an occupational pension, they must deduct contributions from your salary and send these payments to the PRSA provider. The employer may also contribute to the PRSA but does not have to do so.
Link with social welfare pensions
However, it is common for occupational pensions to take into account the level of social welfare pension received in calculating the level of benefit. For example, some schemes provide for a benefit, which, taken together with the social welfare pension, will give you a half or two-thirds of your final salary. These schemes are sometimes called integrated or co-ordinated schemes.
Regulation of pensions
The Pensions Authority is the regulatory body for occupational pension schemes and Personal Retirement Savings Accounts (PRSAs) and certain Retirement Annuity Contracts (RACs). It is responsible for overseeing the proper administration of pension schemes and the protection of pension rights.
The Financial Services and Pensions Ombudsman is the body responsible for dealing with complaints against the providers of these pensions. For more information, read making a complaint about your pension.
Information about your own scheme is available from the trustees of the scheme. Information on pensions and your rights is available from the Pensions Authority.