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August 18, 2025
This week I'll share a real-life(ish) story about a guy (Fran), who built a €2m+ pension pot by 55, by only contributing c€350,000.
And see how it (only) took discipline and a little sacrifice.
Also.
In the mid-90's, at 25, having messed-about in various roles for a couple of year out of college, Fran landed his first 'proper' job in Dublin.
He was earning £45,000, a fine wage at the time.
Like most young professionals, retirement felt like a lifetime away, but Fran had heard her parents' stories about the need to squirrel funds away to avoid struggling in retirement with just the State Pension. He was determined to write a different ending to his story.
"I want choices when I'm older," Fran told himself. "I want to be financially able to retire when I choose, not when I have to."
That simple decision at 25 would transform his life.
Fran's first wake-up call came during his company's pension presentation, which was on 'over-head projector' and acetates at the time I'm sure!
The HR manager explained something that seemed almost too good to be true: for every euro Fran contributed to pension, the government would give him tax relief, and his employer would match his contributions up to 7%.
"Wait," Fran interrupted, "So if I put in £100, I only actually pay £80, plus the company adds another £70?"
"Exactly," smiled the HR manager. "It's the closest thing to free money you'll ever find."
Fran immediately signed up for the maximum he could afford (for ease, I'll use € from here-on!);
Fran's contribution: 15% of salary, the current age-related maximum for 25-30 year olds (€6,750 in year 1)
"I'm 25 and already putting away nearly €10,000 a year," Fran thoughts. "This is actually doable."
Rather than accepting the default middle of the road "Balanced" fund, Fran did his research.
He discovered that the best-performing long-term (he had a c30-40 year time horizon here) pension funds had high equity allocations. Some were as high as 100% equity. At 25, He reckoned he had at least 30 years until retirement. He believed he could handle the ups and downs, in order to achieve a greater long term average return, and greater pension pot in the future.
By 30, Fran was earning €60,000 and had learned a crucial lesson: some birthdays brought higher age-related pension contribution limits!
At 30, he could now contribute 20% of salary tax-free, instead of 15%!
Fran made a pact with himself: every pay rise meant increasing his pension contribution first, before lifestyle inflation could creep in. Simple but not easy!
Age 35 snapshot:
When Global Financial Crisis (GFC!) hit and markets crashed in Fran's late-30s, his fund dropped by 40% in the space of one year.
His colleagues panicked and switched to "safer" funds. Fran felt sick watching his balance fall, but remembered the long-term plan and logic for his equity-heavy and global diversification strategy.
"I'm not retiring for 20 years," he told himself. "This is just noise."
Importantly, during those dark-years, he was able to and kept contributing.
When markets recovered, these contributions had bought equity holdings in his pension funds at bargain-basement prices!
His pension fund didn't just recover, it went bananas!
One of his main funds exploded in value 220% in the period from March 2009 (bottom of the GFC fall-out) to March 2016.
"Best financial decision I never made," he later joked about not panic-selling, and sticking to his plan amidst absolute global melt-down, fear and media carnage.
By 40, Fran was earning €75,000 and could contribute 25% of salary. At 50, the limit jumped to 30%. Fran was loading cash into the pension each and every month. He changed companies a couple of times in the process, and each time got straight back into max funding his pension, and getting employer contributions added.
This final sprint made all the difference.
At 50, his salary was €120,000, so his the age-related amount of 30% was capped at €115,000, meaning he was putting €34,500 into his fund, at a net cost after 40% relief, of only €20,700. Plus employer contributions of 7%/€8,400. He was getting over €42,000 into his pension per year.
Did making these contributions impact on Fran and his partner having a decent lifestyle, you may ask?
They did have to sacrifice changing the car every few years (changing it every 7 years instead), and they didn't get the house remodeled every other year! However, they had their couple of nice holidays every year, and were members of local gyms, golf and clubs, and had social events to beat the band. Life was good.
The magic of compound growth:
Based on approximate total contributions (Fran's plus Employer's) of c€800k over his career...........
And he's done extremely well when we recognise that of the €800,000 contributions, Fran made c€500,000 of them, plus he got average c35% tax relief (weighted across the 20% and 40% bands), so the net cost to Fran to accumulate €2m+ pension pot was around €350,000!
Yes, a €350,000 contribution resulted in a €2m+ pension pot!
"Those last five years added more to my pension than the first fifteen combined" Fran observed.
Just as Warren Buffett is said to have accumulated 98% of his €160Bn net worth after his 65th birthday (!), our Fran has benefited from serious compounding of interest within his (tax-free growth environment!) pension pot.
At 54, Fran again met with his financial advisor to plan his exit strategy, he was of a mind that the time was 'nigh'!
The numbers were compelling:
"I can actually do this," Fran realised. "I can retire at 55."
He had reached his goal, his target, his independence.
Fran could take up to 25% of his fund as a lump sum, but the lifetime limit was/is €200,000 tax free. With a €2 million fund, 25% would be €500,000, of which he could take €200,000 tax-free, and the balance of €300k at a set 20% rate. In theory, he could take €500,000 cash and stick it in his bank account, and pay only €60,000 tax (300k*20%).
Given his priority to have a certain amount of cash at hand only (he had shares and other investments), and his preference to leave a large portion of assets within the tax-free-growth-environment of his pension, plus preserving choice and flex with his pension incomes, he chose strategically:
The €200,000 transformed his retirement:
"I'm debt-free with a beautiful home and €1.8 million still growing in my pension," Fran smiled. "This feels like financial freedom."
With his ARF, Fran had complete flexibility over withdrawals. As he was less than 61, he wasn't obliged to take any income, but chose to withdraw €40,000 annually to cover base living expenses, and to use his tax credits and band. It was the tax efficient thing to do! Of the €40,000, they were netting c€35,000 of it, thanks very much!
"It's like having a €1.8 million investment account that I can access whenever I need to," he explained.
They had a ball, travelling and doing all the things they wanted to do within reason. They spent c€100,000 per year in these early days, letting loose with their new-found time and capital!
At 61, Revenue require Fran (or anyone else with an ARF!) to withdraw at least 4% of his fund annually. With his fund having grown to €1.9 million despite withdrawals (thanks to continued investment growth), this meant €76,000 per year minimum gross income to be taken.
Combined with State Pensions which started at 66, Fran and his partners' total retirement income became:
Total effective tax rate on these incomes (no PRSI) was 20% at this stage, so netting c€83,000 per year, or €7,000 per month. They were living life to the full, without being reckless with the sustainability of their incomes. They took an inflation adjustment on income each year, and kept their income steady every month, not roller-coasting with fund values. Life was good.
"I'm earning more in retirement than I did in most of my working years," Fran laughed.
At 71, the mandatory withdrawal increased to 5% of the ARF fund. But Fran's careful management meant his fund had actually grown to €1.7 million despite 16 years of withdrawals.
Annual income: €85,000 from is ARF plus €28,000 State Pension = €113,000 total.
Fran had always planned to leave something meaningful for kids, and niece and nephew.
With Capital Acquisitions Tax thresholds at €400,000 for children and a 33% tax rate above that, he needed a strategy.
Starting in his 50s, Fran began giving €3,000 annually to each of their two kids, and their niece and nephew, €24,000 total per year, completely tax-free. This was funded initially from assets/savings, and then as ARF income rose, from income each year.
Over 20 years, this allowed them to transfer €480,000 without any inheritance or gift tax!
When Fran passed away at 88, he still had €1.2 million in his ARF, having drawn from the pot for over 30 years.
Combined with his home and other assets, his estate was worth €3.8 million.
Thanks to the gifting strategy and the inheritance tax thresholds, his beneficiaries received the vast majority of his wealth.
And while when Fran's estate is noted in the newspapers, some will say that he was a very wealthy man, Fran and his partner will know that while they accumulated very well, it was all down to a diligent savings regime, and the power of compounding - they got nothing from noone!
Fran's success was built on Ireland's generous pension system, which it is, no question:
"The best time to plant a tree was 20 years ago," Fran would often say in his later years. "The second-best time is today."
Whether you're 25 like Fran was, or 45 and just getting serious about retirement planning, the principles remain the same:
Fran's story isn't unique, it's replicable. With Ireland's pension system offering generous tax incentives and flexible retirement options, building a €2 million pension pot (and more as the SFT increases!) is an achievable goal for any disciplined professional with time and resources on their hands.
The key is understanding that pension planning isn't about restriction, or sacrifice now, it's about creating freedom.
Freedom to retire when you choose, to live comfortably without financial stress, and to leave a meaningful legacy for those you care about.
Your journey to €2 million starts with your next contribution!
I wish you nothing but he best for the months and years ahead.
Paddy Delaney QFA RPA APA
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Informed Decisions are one of Ireland’s only remaining independent financial advice firms. We specialise in retirement & investment planning for successful individuals, so that our clients only have to retire once.
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