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13 October, 2026
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Starting your pension early is one of the most important financial decisions you can make. The earlier you begin saving, the greater the effect of compounding growth. Even modest contributions made in your twenties or thirties can grow into a significant retirement fund, often outperforming larger contributions made much later in life.
When it comes to investing for retirement, time spent in the market is often more important than trying to “time the market” itself.
Markets naturally experience periods of growth and decline. Starting early and remaining invested over the long term gives pension contributions more time to benefit from potential investment growth.
By starting early and remaining invested consistently, you give your pension more time to benefit from potential long-term investment growth, while reducing the pressure of having to make larger contributions closer to retirement.
Simply put, the longer your money is working for you, the greater the potential for building a secure financial future.
Many people delay pension planning because retirement feels a long way off. However, delaying pension contributions means your savings have less time to benefit from potential investment growth. Starting early allows you to spread contributions over a longer period, making pension saving more manageable and affordable. It can also provide greater flexibility later in life, helping you achieve your retirement goals with confidence and peace of mind.
The table below shows the limits that apply to tax relief on personal pension contributions, based on an individual’s age and earnings.
Table 1: Pension contribution tax relief limits by age
| Age | Maximum contribution as a % of net relevant earnings* | Maximum tax-relievable contribution |
|---|---|---|
| Below 30 | 15% | €17,250 |
| 30-39 | 20% | €23,000 |
| 40-49 | 25% | €28,750 |
| 50-54 | 30% | €34,500 |
| 55-59 | 35% | €40,250 |
| 60+ | 40% | €46,000 |
*The maximum amount of earnings considered for calculating tax relief is €115,000 per year
Consider two individuals, both earning €115,000 per year and both contributing the maximum amount eligible for tax relief purposes throughout their working lives.
Table 2: The impact of starting pension contributions earlier1
| Age when maximum personal contributions begin | Projected Fund value at age 65* |
|---|---|
| Person A starts at 30 | €2,710,000 |
| Person B starts at 35 | €2,130,000 |
1Warning: These figures are estimates only. They are not a reliable guide to the future performance of your investment.
If Person A begins making maximum pension contributions at age 30 and continues until age 65, while Person B waits until age 35 before doing the same thing, the difference can be significant.
*Assuming annual investment growth of 5%, Person A could build a pension fund of approximately €2.7 million by age 65, compared with €2.1 million for Person B.
Based on these assumptions, delaying pension contributions by five years results in a projected fund value approximately €580,000 lower at age 65, despite both individuals contributing the maximum amounts allowable to them once they start.
This example illustrates the potential benefit of having more time invested in the market.
The additional 5 years gives contributions more time to benefit from compound growth, where investment returns generate their own returns year after year. Starting early doesn't just mean saving more money; it means giving your money more time to work for you.
The impact of contribution levels
While starting early is important, the level of pension contributions made throughout a career can have an even greater impact on retirement outcomes. Pension contributions benefit from valuable tax relief, and many employees can further boost their savings with employer contributions. Where an employer contribution is available, this can further increase the amount being invested for retirement. Some employers may also match pension contributions.
To demonstrate this impact, we compared two scenarios for the same employee: one where the employee contributes 5% of salary and receives a 5% matching employer contribution, and another where the employee maximises their age-related tax-relievable contributions in addition to the employer contribution.
Table 3: The impact of higher pension contributions2
| Level of Contributions | Projected Fund value at age 65* |
|---|---|
| 5% Employee & 5% Employer | €1,475,000 |
| Max Age Related % Employee & 5% Employer | €3,450,000 |
2Warning: These figures are estimates only. They are not a reliable guide to the future performance of your investment.
* For the above analysis, we have assumed both employees are aged 30, earn a salary of €115,000 per annum inflation indexed, receive a 5% employer contribution and achieve an annual investment return of 5%. Pension funds grow tax-free.
The findings highlight the significant difference that increased contribution levels can make over the longer term. Where possible, by taking full advantage of both employer and maximum age-related tax relievable contributions, employees can substantially improve their retirement savings.
When it comes to retirement planning, two factors can have the greatest impact on your eventual outcomes: time spent in the market and the level of contributions you make. Starting earlier gives your investments longer to benefit from the power of compounding growth, while increasing contributions can significantly boost the value of your pension over time.
The combination of consistent contributions, tax relief, employer support, and long-term investment growth can make a substantial difference to your retirement savings and financial security.
If you would like to learn more about how your pension strategy could support your long-term financial goals, why not book a no-obligation consultation with a member of our team?
Warning: The information in this article is not a recommendation or investment research. It does not purport to be financial advice and does not take into account the investment objectives, knowledge and experience or financial situation of any particular person. Investors should determine whether an investment is appropriate to their own personal circumstances.
Warning: The tax information discussed in this article is provided for Irish-resident investors by way of general guidance only. It is neither exhaustive nor definitive and is subject to change without notice, including potentially with retrospective effect. It is based on Davy’s understanding of Irish tax legislation provided by Revenue as at October 2026. It is not a substitute for professional tax advice. Davy does not provide tax advice. You should consult your own tax adviser regarding the rules that apply to your individual circumstances.
Warning: The value of your investments may go down as well as up.
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