Is it too late to start a pension at 45? It’s never too late, experts say. With pension auto-enrolment just four months away, starting a pension now before your hand is forced could leave you better off.
“Age 45 is definitely not too late,” says Kristen Foran, national sales director of Zurich Life.
“The State pension right now is about €15,000 a year, so the question is, could you live on that if you were to retire tomorrow? Most of us couldn’t,” says Foran.
How much extra will you need? The answer is, more than in the past – being a so-called old age pensioner isn’t what it used to be.
First up, people in Ireland are living healthier and for longer – so spending on hobbies, sports, socialising, shopping, travel all remain in prospect after the standard retirement age of 66.
Indeed, by 2046, Irish men can expect to live to 85 and women to 89. That’s at least 19 to 23 years of living, or about a quarter of your lifespan to enjoy, after your final pay cheque.
Other things have changed too. People spend longer in education before earning and buy their first home later too. It’s no wonder there has been a 20 per cent increase between 2016 and 2022 in the number of over 65s still paying a mortgage, according to Central Statistics Office (CSO) figures.
People are having children later too, so even if you are 66 and mortgage-free, you might not be child-free. Almost seven in 10 adults still live at home aged 25, says the CSO. With the average age of moving out now 28 according to Eurostat figures, supporting adult children can be costly too.
The trouble is, one in four workers in Ireland aged 55 to 69 don’t have a private pension, according to the CSO. Paying for everything from a State pension income of about €1,250 a month is going to be tight – more than one in ten of those over 65 are at risk of poverty, according to the figures.
Focus at 40
Hitting 40 can focus the mind, and bring the financial headroom to look at pension, says Nick Charalambous of Alpha Wealth.
“You’re generally getting paid more than in your 30s, you might have bought the house, you are already paying for childcare, so you can look at what’s left over,” says Charalambous.
“Maybe childcare expenses have lessened, or your mortgage is fixed at a lower rate, maybe you got a pay rise or a bonus – this could now be applied to your pension,” he says.
At 45, there are still 20 years of tax relief still available to you – for higher rate tax payers, that’s 40 per cent back from the Government on your pension contributions. Those paying tax at the standard rate get 20 per cent back. Some employers contribute generously too. Not having a pension means leaving that free money on the table.
Your pension savings, unlike savings in a bank, will grow tax-free too, and you will get a chunk of it tax-free when you draw it down, says Charalambous.
“It’s never too late to act on a pension,” he says.
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How much to aim for?
Thinking about what you would like your life to look like post-retirement can help you fix on a target retirement income number, says Foran.
“Let’s say I wanted €1,500 a month when I retire, which is €18,000 a year, on top of my State pension of €15,000. That would give €33,000 a year and I think I’ll cope on that,” says Foran.
Had you started a pension at 25, you’d have to contribute €125 a month to achieve that figure, she says. That’s assuming a return of 5.5 per cent – you could, however, get a return of up to 10 per cent, she says.
Higher rate tax payers would get 40 per cent of their pension contribution back in tax relief – so that €125 contribution is actually only costing you €75 a month.
Those starting a pension aged 35 would have to contribute €173 a month, or just €104 after higher rate tax relief. If you are starting aged 45, your contribution to achieve that retirement income would need to be €269 a month, or €161 after tax relief, says Foran.
“Yes, the later you start, the tougher it is because you have a shorter time to build up a fund, but don’t let that put you off,” she says.
[ How can I find what my likely State pension will be?Opens in new window ]
Zurich Life provides a useful calculator which estimates the monthly contributions required by age to achieve your target pension income.
Some have eschewed pensions for fear their hard-earned contributions could be lost in a stock market dive.
“The reason we have stock markets and we invest in them is because ultimately they do well over time,” says Foran.
There are ups and downs, she says, but pension holders play a long game which can smooth market volatility over time. You have the option of choosing funds with high, medium or low risk levels too.
“Investing in stock markets is a recognised way of making money, the biggest chunk of your pension when you retire is probably the growth on your investment, not your contributions themselves,” she says.
A pension fund of around €400,000, including the State pension, would be sufficient for most people, says Charalambous.
Of that, €100,000 is typically tax-free and the three quarters remaining, €300,000, would give you an income of about €25,000 a year based on a 8 per cent or so drawdown rate, says Charalambous.
Add to that the €15,000 State pension that full contributions would give you and you have €40,000 a year, he says.
“I believe for a lot of us, that would be enough,” he says.
If you are starting from no pension at age 45, contributing €500 a month will cost higher rate taxpayers €300 in effect because of the 40 per cent tax relief, he says.
In short, starting at 45 means bigger contributions, but it may cost you less than you think.
The impact of auto-enrolment
If you’ve been unable or undecided about pension until now, the Government is now going to make the decision for you.
From January 2026, workers aged between 23 and 60 who earn at least €20,000 a year across one or more jobs and who are not already members of an occupational pension scheme will be automatically enrolled into a Government scheme called My Future Fund.
Employers and employees will each initially contribute 1.5 per cent of gross earnings to their pension pot, with the Government adding a further 0.5 per cent. The contributions are due to increase in stages, reaching 6 per cent and 2 per cent respectively in year 10.
“Those currently not paying into a pension will find themselves in a scenario where they will be forced to,” says Nick Charalambous.
Indeed, auto-enrolment is about making sure the estimated 800,000 earners who aren’t currently on a pension scheme have more provision for their future, he says.
[ One in four businesses not ready for new pension regimeOpens in new window ]
Those who have arranged a pension themselves, but it’s not running through their employer’s payroll, will be opted into auto-enrolment too. Not everyone will be happy about this double deduction.
“If you have another deduction of 1.5 per cent from salary, you are probably not really going to appreciate it,” says Charalambous.
The Government contribution to your auto-enrolment plan is 0.5 per cent of earnings, or 33 per cent of the employee’s contribution – which is 1.5 per cent of earnings.
While this is not tax relief, as it’s a top up directly into the plan, if you were to compare it to the tax relief on a private pension, it would be like getting 25 per cent relief, says Foran.
“So, it’s more than the relief a 20 per cent taxpayer would get (on their contribution to a private or workplace pension), but less than a 40 per cent taxpayer would get,” she adds.
That’s why higher rate tax payers can be better off joining their employer’s pension scheme, and fast, rather than being opted into auto-enrolment where the relief will be less for them.
Setting up a private pension yourself, where your employer facilitates your contributions through payroll as they must, will get you this tax relief too.
Indeed, auto-enrolment works out best for those in the lower tax bracket where tax relief on pension contributions is just 20 per cent – with auto-enrolment, these lower earners will get more.
The Zurich Life calculator shows the difference between private/workplace pensions and auto-enrolment, depending your circumstances.
“If you are a higher rate tax payer, you should try to avoid auto-enrolment, that’s the rule of thumb,” says Charalambous.
If you are starting a pension now, aim to have the first pension contributions going through payroll by mid-November. This will avoid you being enrolled into the State model by default.
If you don’t have a monthly pension payment going out through your company’s payroll before the end of November, you’ll see changes from January 2026, pension providers say.
There are other advantages to a private pension too – you can access your pot from the age of 50 for example – this could be helpful if you wanted to pay down your mortgage early. The soonest you can access your auto-enrolment pot is the State pension age of 66.
Starting a pension, even at 45 still gives you a 20 year runway to build up a fund. Make the move before auto-enrolment and higher earners will ensure they get the maximum boost from the State on their contributions.
