Family & Foundations – Pensions

Have you given any thought as to where your income will come from in retirement?

Do you have a private pension in place to bridge the gap between pre-retirement income and income for your 2nd life?

When was the last time you reviewed your pension arrangements?

It is important to set aside the time now and speak with us about funding for the replacement income you will require to enjoy your second life in retirement.

PRIVATE PENSIONS

Having a private pension in place to fund for your desired lifestyle in the years ahead is vital.
The earlier a private pension is put in place, the longer the timeframe to make contributions, which can grow tax free in value up until retirement.
Proceeds from a private pension will help bridge the income gap between age 60 and the start of the State Pension.
If affordability allows, the minimum target private pension fund at retirement should be €400,000, from which a tax free lump sum of 25% or €100,000 can be taken. Drawing down 4% of the remaining €300,000 will generate an annual income of €12,000.
The type of pension policies available to the self-employed include Personal Pensions and Personal Retirement Savings Accounts.
The type of pension policies available to employees include Company Pension Policies and Personal Retirement Savings Accounts.
Pensions from previous employments can be transferred from old employer pension policies into Personal Retirement Bonds in your own name, allowing you to access retirement benefits from age 50.
Auto-Enrolment will commence in January 2025 for employees with no pension contribution being deducted through payroll.
Do you have existing pension arrangements in place? When was the last time you reviewed the level of contributions being made? Do you know what the estimated maturity values are? Are you happy with your fund choice and confident that the risk level of those funds is in line with your risk rating? Do you know what the charges are?
If you have pensions from previous employment we can help you transfer into your own name, giving you control over that money now until retirement.

PERSONAL PENSION

A personal pension is also known as a Retirement Annuity Contract (RAC).
Personal Pension Plans are geared towards the self-employed and those in non-pensionable employment.
Such plans can accept either single premiums or regular premiums in order to build up a fund for retirement.

PERSONAL RETIREMENT SAVINGS ACCOUNTS

A Personal Retirement Savings Accounts is a simple and flexible private pension product

Anyone can set up a PRSA regardless of their employment status.
The policy is owned by the client and there are no policy fees or pension board fees.
Growth on a PRSA is tax free.
The Normal Retirement Age (NRA) doesn’t have to be the same on each PRSA contract held by you.
PRSA’s allow for a phased retirement as if more than one contract in place, each can be drawn down at different times enabling you to control your retirement income and lump sums.
A tax free lump sum of up to €200,000 can be taken from a PRSA. Where the lump sum is more than €200,000 a 20% flat rate of tax on the excess applies.
In the event of death before drawing down benefits, the full value goes tax free to the deceased’s Estate. Capital Acquisitions Tax may apply depending on who the beneficiary is.
PRSAs can be funded by both an employee and their employer. Such PRSA’s are known as Employer Sponsored PRSA’s.
Where an employer is contributing there is no restriction on the level of employer contribution.
The employer gets full tax relief on regular and single contributions in the year of payment.
An employer can claim corporation tax relief in the year the payments were made.
There is no Benefit-in-Kind on an Employer Sponsored PRSA.

COMPANY PENSIONS

Company Pensions, otherwise known as occupational pensions, are set up by employers to provide benefits for their employees in retirement which include a tax free lump sum (within limits) and a regular income.
Other benefits include death in service.
The most common type of company pension is a defined contribution plan into which the employer makes a regular fixed contribution and ideally the employee would also contribute a portion of their salary, in order to provide income in retirement.
The value of your pension pot at retirement will depend on the level of contributions that were made, fund performance and plan charges and fees.
Another type of company pension is a defined benefit plan. Nowadays such plans are less common. These plans would have been set up by employers in the past and would have generated a fixed payment each year for the employee in retirement.
Where an employer does not have a company pension scheme in place they must give you access to a Personal Retirement Savings Account (PRSA). PRSA’s can be funded by both an employee and their employer. Such PRSA’s are known as employer sponsored PRSA’s.
Were you a member of an occupational pension in a previous employment?

PERSONAL RETIREMENT BONDS

How many times have you changed jobs since embarking on your working life?
Over the course of your career did you have pension policies in place with those employers?
Did you leave those old policies sit with your old employers and without regular review and proper management?
Did your monies transfer into a default pension fund which may have become a wasted opportunity for growth?
Do you still have your pension scheme documentation? Do you know the contact details for those pension administrators?
Do you know the current value of your old policies?

If you have pensions from previous employments, we can help you transfer them into your own name into what are known as Personal Retirement Bonds:

A Personal Retirement Bond is a single contribution product which can accept the transfer from old company pensions. No additional contributions can be added to this product.
Personal Retirement Bonds offer a client the freedom to manage their pension entitlement upon leaving service, whereby they retain control of their pension plan and its investments, whilst enjoying tax free growth on the investment.
Personal Retirement Bonds are long-term retirement products where generally access won’t be granted until at least the age of 50 where the client has left the employment to which these benefits related or at the normal retirement age for the scheme.

Benefits of Personal Retirement Bonds:

Putting a Personal Retirement Bond in place now takes the hassle out of tracking down your old scheme information at retirement.
It gives you back direct control over that money – of how and where that money is invested from now until your retirement.
It allows you to break any links or ties with old employers.
You can make changes to those pensions without any requirement for third party signatures.
Early retirement benefits can be taken from age 50 as opposed to the normal retirement age assigned to your old occupational pension policy.

AUTO-ENROLMENT – WHAT WE KNOW SO FAR

Auto-Enrolment is due to commence in Ireland from January 1st, 2025.
The scheme will be run by the National Auto Enrolment Retirement Savings Authority.
An employee between the age of 23 and 60, earning a minimum of €20,000 with no employer or employee pension contributions being deducted through payroll, will be automatically enrolled.
A waiting period or probationary period does not apply for joining.
Contributions are based on a maximum salary of €80,000 .
Contributions in year 1 are fixed at a total of 3.5%. This breaks down into an employer contribution of 1.5%, an employee contribution of 1.5% and a State Contribution of 0.5%.
Contributions increase further in years 4 and 7 and from year 10 onwards plateau at 14%.
Membership is compulsory for the first 6 months, with an option to opt-out thereafter.
There is no scope for employees to make additional voluntary contributions (AVC’s).
There is no tax relief for employees under Auto-Enrolment.

STATE PENSION

The Contributory Old Age Pension or State Pension currently only provides income from age 66.
It doesn’t recognise early retirement and it doesn’t pay out any lump sums.
For the majority of people, it won’t be enough to live off and it amounts to just 34% of the average industrial wage.
If you happen to be self-employed there is no entitlement to the State Pension.