The tax relief available on contributions to pensions depends on your age. Up to the age of 30, tax relief is limited to 15 per cent of your annual income.

This increases to a limit of 20 per cent for people in their 30s and 25 per cent in their 40s. Finally, people aged 50 and over can contribute up to 30 per cent of their income and avail of tax relief, subject to an earnings cap of €254,000.

A self-employed person with a tax bill of €6,000 who pays tax at the higher rate of 42 per cent might decide to invest the €6,000 in a personal pension or Personal Retirement Savings Account (PRSA). He or she would make a tax saving of €2,520 (€6,000 at 42 per cent) and the pension contribution would effectively cost them just €3,480.

Older forms of personal pensions have higher upfront charges, which lock customers in. But it may be a good idea for people who took out a policy before 2001 to ask their adviser to review the policy. As long as they are still some way off retirement, it may be worthwhile switching to a new model of personal pension with lower charges.

Personal Retirement Savings Accounts (PRSAs) were introduced two years ago and are designed for anyone who is not a member of a company pension plan. Some insurance companies also sell AVC PRSAs to people who are in company schemes but want to make additional voluntary contributions.

A factsheet on PRSAs is available from the regulator by calling 1890 777 777.