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What benefits are there to having a retirement account called a "pension" in Ireland, as opposed to simply making investments of one kind or another for the same purpose? I am not really asking about the payback as such, more about the security and nature of the arrangement; in that I understand that a pension carries with it certain other benefits, for instance my financial advisor told me one thing about tax breaks based on pension payments and also something about an individual who went bankrupt and though his creditors were able to take his house and businesses, they couldn't by law touch his pension.

I am in Ireland so the law may be different per country, so I am really just asking generally, are there other benefits similar to these, or what is the difference between having bona fide pension and say if i was good at playing stock market or something like that?

I stared a pension recently and at the end of one year I had the exact same as what I put in, plus €4. Further to this while I believe that the pension I am on is with a good company, is there any guarantee that I wouldn't end up with less than I put in?

Chris W. Rea
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byronyasgur
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2 Answers2

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Here's an Irish government publication that should give you some background information to get you started.

In a nutshell, you get tax benefits, but cannot withdraw money without penalty until you reach retirement age.

duffbeer703
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As you point out, the main benefits of a pension/retirement account over a traditional cash/taxable account are the legal and tax benefits. Most Western countries establish a specific legal definition for an account which is often taxed less or not at all relative to taxable accounts and which contains some protection for the owner in case of a bankruptcy. The typical drawbacks for investing within such structures are limited investment choice, limited withdrawal rights (either in terms of age or rate of withdrawal), and maximum contributions. The benefits are usually very clear, and your decision whether or not to open a pension/retirement account should depend on a careful weighing of the benefits and drawbacks.

As to whether you may end up with less than you started, that depends on what you invest in. As with all of finance, you must take more risk to get more return. Although the choices inside a pension/retirement account may be worded somewhat differently, they are usually fundamentally no different than some of the most popular investments available for ordinary taxable accounts.

Tal Fishman
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