How Pensions Work

Life assurance companies & investment companies are the main providers of pensions in Ireland. They employ fund managers to invest your contributions in one or more pension funds. These funds are used to buy and sell assets, such as shares, bonds, property and cash. There are many types of pension funds and each fund is invested in a different mix of these types of assets.

For example, a typical pension fund might have:

  • 50% of its assets invested in shares
  • 25% of its assets invested in bonds
  • 15% of its assets invested in property
  • 10% of its assets invested in cash

The value of the pension fund rises and falls, depending on the performance of the shares, property and other assets in which it invests. The fund is expected to grow by a certain amount each year but this is not guaranteed and fund values go up as well as go down over the years. The value of your fund will be reduced by any fees and any charges you have to pay. Your pension fund is a long-term investment that you should ideally keep for 20 to 30 years or longer. This gives enough time for your fund to recover growth if it falls in value. Note - You get tax relief on contributions to your pension.

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