Table of Contents

Key Principles

Compare Top Pension Funds

Getting a Head Start

Should you wait for auto-enrolment?

Pensions vs Other Investments

Using Pensions to Pay Less Tax

Final Tips & Advice

What if we told you that you could be sitting back and enjoying margaritas on a beach somewhere, while all of your friends continue to prepare for Monday morning meetings?

And what if we also said that you wouldn’t have to win the lottery to achieve this reality?

Right now, if you’re in your 20s, you’re probably not thinking too deeply about retirement or the possibility of retiring early.

But you’re here, which suggests you might have at least a passing interest in pensions.

In fact, you probably don’t realise it yet, but just by being on this page you are already ahead of the game. You’ll be able to use the information and strategies in this guide to out-invest almost all of your peers.

Before we explore the amazing effect that compound growth can have on even small investments, let’s quickly look at our 5 core principles for pension investing in your 20s.

Principles for Pensions Investing in Your 20s

Getting started, if you don’t already have a pension, could be one of the best decisions you ever make in your life. It is by far the best advice we can offer, because of how compound growth works over long periods of time.

The difference between starting to invest at 25 and starting at 35 is massive, and we will explore early investing in more detail below with some straightforward examples.  

Getting started in your 20s also gives you flexibility – you can contribute less throughout your life – or contribute more per month and retire earlier or take a large tax-free lump sum when the time is right.

This is related to starting early, but it qualifies as a separate principle. Starting a pension in your 20s is only beneficial if you begin to make consistent contributions. Even if the amount feels small at first, it quickly adds up and it grows over time.

For example, if you invested just €100 per month for 30 years at 8% growth (€36,000 total), you’d have a pension worth around €136,000, excluding fees.

The same investment over 20 years would be only €55,000.

Of course, you will probably be able to contribute more as you get older which will leave you with an enormous pension pot to enjoy when you retire.

Playing it too safe in your 20s is a waste of time because you have no savings to protect and you have decades to go before you retire, meaning you can surf the inevitable highs and lows and still come out the other side with huge returns.

When the next financial crash destroys the economy and your pension fund suffers, you can relax because you have lots of time to watch it rebound again. 

Overall, even though your investments will rise and fall, you’ll still be much better off. High equity funds have always rebounded following financial crashes, and if you wait long enough, there are huge returns to be made.

What this all means is essentially choosing a pension fund with a risk rating of 5, or possibly 6.

Management fees and other charges look tiny, often a percent or less. But remember, just as your savings grow thanks to compound growth, the fees will also grow as these charges are on your overall savings and not your contributions. 

A fee of 1% of €1,000 you contribute in your first year is only €10. When your pension pot reaches €300,000 in the future, this is €3,000 in fees annually. So be on the lookout for fees and other charges if you’re choosing a pension.

Overall, auto-enrolment is positive. If you’re over 23, without a pension, and earning over €20,000 per year, you will start paying into a workplace pension in 2026. Your contributions must be matched by an employer and the State will also chip in with a smaller amount. 

This will also grow over time, however, if you are serious about your pension and you are in a position to contribute more than a tiny percentage of your salary, then opting for a PRSA will allow you to grow your pension much faster, giving you a head start on almost everyone else your age.

The Best Pension Funds in Your 20s

If you’re interested in choosing a pension fund or comparing your current fund’s performance with others with a similar risk profile, it can be a minefield due to the sheer number of different funds out there. There are over 600 to choose from – and each one is different.

To simplify things for now, we’ve compiled a list of 5 pension funds – one from each of the main providers. Each fund here has a risk rating of ‘5’. 

Note: There are hundreds of other funds, and using this guide and our comparison tool is a great way to familiarise yourself with the concepts – but speaking to a financial advisor is always recommended to ensure you make the best possible decision.

Starting at 25 vs 35: Getting a Head Start

Let’s say your life looks something like this: you’re 25, and you’re in full time employment. Each month you put some money away for a rainy day, and you can save another €100 per month by making a few sacrifices.

If you put this extra €100 per month under your mattress each month, you’ll have €36,000 in 30 years’ time.

A better option would be to invest in your future retirement.

Let’s suppose that you take this at face value, and you decide to invest your €100 into a pension which has an annual growth of 10%. This would leave you with nearly €200,000 when you’re 55, from the €36,000 invested.

So what’s the difference between starting now and starting in 10 years?

If you start investing €100 per month now, by the time you’re 35 you’ll have around €10,000 saved. 

You might be thinking, “€10,000 isn’t a lot – I can probably just start when I’m 35 and be just as well off.” 

If you start from scratch when you’re 35, investing €100 per month, by the age of 55 you’d have about €70,000 – which is a huge difference. 

And the longer the growth compounds, the better. If you started contributing just €100 per month today, you could retire at 65 with a pension in the hundreds of thousands, from only €48,000 invested. 

Although our example is simplistic and deliberately ignores management fees, tax-free lump sums, de-risking, and the fact that 10% growth is optimistic, our point stands.

The earlier you start to maximise your contributions and the more you can afford to put away, the more time you will have to benefit from compound growth.

Auto-enrolment – Should you wait for it?

If you’re older than 23, earning €20,000 or more and without an occupational or private pension, you will be automatically enrolled in the new workplace pension scheme in 2026. 

However, as we’ve already discussed, the more you contribute the better – especially in your 20s because of compound growth.

There are enormous benefits to introducing automatic enrolment in Ireland – for every €3 that employees contribute from their salary, their employer will match this, and the State will also put in €1.

But remember that they can only contribute 1.5% of their salary in year 1. This means that if you earned €20,000, you’d only put in €25 per month, or €50 per month if you earned €40,000 per year (before your employer and the State’s contributions).

With a PRSA, you can contribute much more if you can afford to do so – up to 15% of your salary can be put into your pension and you’ll get tax relief on your contributions. 

Simply put, your taxable income is reduced by the amount (up to 15%) that you put into your pension – up to 15%.

Investing in any pension is positive, and auto-enrolment will only serve to grant hundreds of thousands of pensionless employees a more pleasant retirement. 

But if you really want to take advantage of compound growth and tax relief in your 20s, you might want to consider a PRSA where you can contribute much more of your salary if you’re in a position to do so. 

If you already have an occupational pension, or earning south of €20,000, this won’t affect you as you won’t be automatically enrolled.

Pension Investing vs Other Investments

Arguing the case for investing in a pension over other investments is easy when speaking to someone in their 50s. After all, they’re nearly at retirement age and they can access their funds in about a decade or so. 

If you invest in a pension, you will have to play the long game. It will be decades before you can access your pension savings.

But there are many reasons why this game is worth playing. 

  • Unlike other investments like property or shares, your pension investments will grow year-on-year entirely tax free. This can make a huge difference over long periods of time.
  • Your employer might also make contributions to your retirement fund – which they won’t do if you invest in something else.
  • It’s not one or the other. One mistake people make is to think they must put all their eggs in one basket. Your pension contributions can complement your other investments with the advantage of growing tax free.

As well as the first reason above, pensions have another huge tax benefit over other investments, which we will discuss next.

The Legal Way to Pay Less Tax in Your 20s

Taxes are a part of life whether we like it or not, and there aren’t many ways of avoiding them. But there is one, and it relates to pension investing.

One of the most efficient ways of bypassing the taxman is actually through pension contributions. In your 20s, you can contribute up to 15% of your salary with tax relief.

So what does this mean?

Basically, if you earn €30,000 per year, you could put €4,500 into your pension and receive tax relief. Essentially, you’d be taxed on €25,500 instead of €30,000 saving you €900 per year in tax.

This significant investment would have decades to grow tax free.

Even if you decided, for some reason, to invest this €4,500 now, and never contribute another cent into this pension fund until you retire, it would still grow to nearly €68,000, assuming 7% annual growth.

While compound growth is the top incentive for pension investing in your 20s, tax relief begins to become more attractive when you begin to pay taxes at the higher rate of 40%.

For instance, someone in their 20s earning €50,000 usually pays 20% on the first €42,000 and 40% on the remaining €8,000.

If you were in this position, you could put €7,500 into your pension (15%), meaning you would reduce your taxable earnings to €42,500. That would mean only €500 is taxed at 40% – as you’ve invested €7,500 in your pension.

This is one reason people tend to contribute more as they get closer to retirement, but don’t rely on this. Make the most of compound growth in your 20s by utilising tax relief and maximising your pension contributions.

Some Final Tips for Pension Investing

For various reasons, most people in their 20s don’t invest in a pension unless their employer has set one up for them. 

Those who have an occupational pension are often unaware about their pension fund, how much they contribute, and other high performing funds on the market.

If you’re in your 20s, and you’re interested in making the most of compound growth to skip the queue and be first in line for an early retirement, you should speak to a financial advisor about your options.

We’ll offer some final tips and summarise the above before we let you go. 

  • If you can, get started – compound growth could leave you with a huge pension pot and you might even be able to retire early.

  • Maximise your contributions – not only are you making the most of compound growth, but you also get 15% tax relief on contributions.

  • You can invest elsewhere, but remember that the tax incentives of pension investing are unmatched. Your investment grows tax-free, unlike other investments.

  • Don’t play it too safe. Go for a fund with a moderately high risk rating with decent long-term performance. Most people in their 20s opt for a fund with a risk rating of 5.

With all that said, we hope you have taken something from our guide to pension planning in your 20s, and we hope you heed our advice and get the ball rolling. We will leave you with some links below if you want to learn more about pensions in Ireland. 

We wish you the very best of luck.