Retirement

31 March 2016

When should you start saving for your pension?

If you have a regular, taxable income, you can in theory start saving for your pension when you turn 18. That is the earliest age from which you can benefit from the tax advantages linked to a pension savings plan.

In general, the earlier you start, the higher the return on your savings will be. The amount is linked to the accumulation of interest and capital.

Let us look at 2 examples:

Tom was born in 1988 and took out a pension savings plan in 2013, at the age of 25. The pension savings fund he has chosen provides an average annual return of 3%. After all the taxes and charges have been deducted, Tom can expect to have accumulated a capital amount of approximately 65,547 euros at the age of 65.

If he were to take out the same plan with the same return but from the age of 35, he would only receive approximately 41,505 euros at the age of 65 - around 24,042 euros less!

Paul is 45 years old and takes out a pension savings insurance plan offering a guaranteed interest of 1.25%. Each year he pays in 940 euros, which allows him to accumulate a capital amount of 19.542 euros by the age of 65.

If he had taken out the same plan with the same conditions at the age of 35, he could have expected a capital amount of 31.065 euros.

But it is never too late.

In fact, the tax advantages are available provided that your savings plan runs for at least 10 years. That means you can start a pension savings plan at age 55 and still benefit fully from the tax advantages.

This table lays out the specifics of each pension savings solution.