Retirement Planning
Given that most people will spend up to a quarter of their lives in retirement and that the state pension is currently €11,975 per annum*, saving for retirement is an essential part of financial planning. A pension is simply a retirement savings plan by another name. While your retirement may seem like a long way off, starting a pension now can make a big difference in the future (not to mention the tax benefits in putting your money into a pension). The amount you need to save depends on a number of key factors such as; when you’d like to retire, the kind of lifestyle you would like to enjoy in retirement and any pension arrangements you may already have in place. There are a number of different pension types available to people. With the various changes to pension legislation over the past several years there are now several options available to most retirees. We provide independent advice in relation to all types of Pension and Benefits at retirement.
- Will you face a significant drop in income when you retire?
- Have you considered the generous tax relief available with a pension plan?
- When was the last time you reviewed the charging/fund structure of any existing pensions you hold?
*Information correct as at 10/07/2014. Source: http://www.welfare.ie/en/Pages/Payments-for-retired-or-older-people.aspx
| Age | Contribution limits for Tax Relief |
|---|---|
| Under 30 | 15% |
| 30-39 | 20% |
| 40-49 | 25% |
| 50-54 | 30% |
| 55-59 | 35% |
| 60 and over | 40% |
The maximum annual amount of earnings for which tax relief is €115,000
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A personal pension plan is a long-term investment that aims to help you build up a pot of money that you can use to provide an income for yourself when you retire. The value of the benefits payable to you depends on the level of contributions you have paid and the investment return achieved from the funds in your personal pension plan. Personal pension plans are designed for people who don’t have a pension scheme through work and who want to contribute themselves. As a result, this suits people who are self-employed or have no pension through their employment. You can take your retirement benefits from a personal pension plan as follows: at any time after age 60 but before age 75, and at any time in the event of serious ill health. You do not need to retire in order to draw a retirement benefit. In the case of retirement due to ill health, you will be deemed to be permanently unable to work.
They are very similar to Personal Pension Plans, but have a number of features that make them more flexible. If employed, your employer can also contribute to the PRSA. You can carry the PRSA from one employment to another, and can switch into (or from) a variety of other pension plans. If you cease an employment, you could take the benefits from a PRSA from age 50. Charges on a PRSA are restricted. Some PRSAs offer more limited investment options than a Personal Pension, so they may suit some individuals, but not others. We can help in selecting the most suitable for you.
An Executive Pension is a plan suitable Company Directors and Business Owners as it allows you to benefit from pension contributions paid by the company on your behalf. It also allows you to provide for your pension fund independent of the company’s assets and its future profitability. An Executive Retirement Plan provides the following benefits, Company contributions are tax deductible, Director contributing gets tax relief on his/her contributions, Additional protection benefits can be included in the Plan in a tax-efficient way. They also provide greater flexibility in regards to how you drawdown your benefits at retirement.
A Small Self-Administered Pension Scheme (SSAPS) is an employer occupational scheme with less than 12 members. It can be used where family members work and own a business together or for groups of company directors. It allows both employee/director to decide on what the pension plan invests in. Both the employer and employee can (within limits) contribute to the SSAP. Under Revenue rules all SSAPSs must have a Revenue-approved Pensioneer Trustee. This will be a person or a company who is independent of the business and who is a professional pension trustee. The difference between this type of pension and any other pension is that instead of giving your money to an insurance company for them to invest, you keep the money and invest it yourself. There are some restrictions on how you can invest the money.
Approved Retirement Funds (ARF) are post retirement plans which allow individuals to maintain control over their pension funds beyond retirement, without the requirement to purchase an annuity payment for life. The ARF option is generally available to all pension assets with the exception of those arising from Defined Benefit Pension Plans. One of the main attractions is that an ARF does not die with you (as generally happens with a lifetime pension). From an estate planning perspective it can therefore be very attractive. If you opt for an ARF, you will be reliant on these funds (at least partly) to provide your retirement income. As such it is extremely important that a suitable investment strategy for the ARF be adopted according to your individual requirements. This may well differ significantly from the investment pre-retirement, as liquidity becomes an important factor.
An annuity is a product that allows you to use your pension fund to purchase a guaranteed, regular pension income in retirement. The amount of income you receive will be based on, among other things, your life expectancy at retirement – so will vary by retirement age – and the size of your retirement fund! While you may have accumulated your pension fund/s with one or more pension provider, there is no requirement to purchase the annuity with any one company. Legislation states that you can choose the company with the best annuity rate and this is called the open market option.
Pension Calculator
Calculator provided by New Ireland Assurance (calculations subject to underwriting criteria)
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