Given that a 66-year-old retiring today can expect to live until their mid-80s, many people can have around 20 years of retirement to fund.

Pensions allow you to save while you are working and earning money, with a view to having enough money to replace as much of your income as you can when you retire. The money you put in is given tax relief.

The money will grow tax-free, and then you are entitled to take a tax-free lump sum when you retire.

The remainder of your money will be subject to income tax, because it is essentially becoming your weekly or monthly wage.

If you have a long time to go until retirement, you should be taking on more risk with your pension, as losses are generally recovered over longer timeframes.

However, if you only have a short term to go, making sure that losses aren’t incurred will be important.

The annual charge that the pension provider will levy needs to be kept down too. This is normally around 1% to 1.5% of your fund.

The State pension

There are two kinds of State pension, a means-tested one, paid only to people in very modest circumstances, and a contributory pension that is paid to people who have worked.

This is based on the number of PRSI contributions made while in employment, and is not means-tested.

PRSI for the self-employed was introduced in 1988, so farmers reaching 66 years before 2021, who have made at least 520 full-rate PRSI contributions, are likely to qualify for the tax-free contributory State pension.

However, with the rising cost of living, and the age at which a State pension is awarded being pushed out all the time, (age 66 currently) the annual pension of approximately €12,000 can entail a significant drop in income and living standards for many people.

A private pension can help to supplement retirement income and bridge a gap for those who want or need to retire a little earlier.

Retirement planning for women

Retirement planning for women can be more complex, for various reasons.

Firstly, on average, women live longer than men, so need more to retire with. Secondly, women often get paid less than their male counterparts; they are in part time work or short-term contracts, and sometimes take career breaks, eg if having children.

Getting a contributory State pension relies on paying social insurance (PRSI) contributions, but many may have given up employment or had to leave civil service jobs after marriage.

If they worked alongside their husband on the farm and, with social insurance rules, a person employed by his or her spouse, or is assisting them, without being a partner in the business, is excluded from social insurance cover.

PRSI cover

They only have a State pension entitlement under their husband’s PRSI cover, as a ‘‘qualifying adult’’, but this is a means-tested pension based on her income and/or assets, and part ownership of the farm may reduce any entitlement.

It is possible to have the contribution recognised and her PRSI record amended to show she was in partnership with her husband. But this can be a lengthy process and affect other legal and financial considerations, so professional advice is recommended.

Young farmers are more likely to have a farm business registered as a partnership, but for those approaching retirement now, look at options to make PRSI contributions as an ‘‘assisting spouse’’ or if you qualify for pension credits under the Homemaker’s Scheme.

Paul Merriman is a qualified financial planner, founder of AskPaul.ie and CEO of Pax Asset Management.