Pensions

Pensions don’t have to be complicated - A pension is simply a long-term savings plan where you save regular amounts or lump sums to build up a nest egg for your retirement.

The State Pension

Many people who have not made other pension arrangements will have to survive on the state pension, currently €230 per week. The current average industrial wage for 2009 is €630.45 per week. Clearly, if you want to maintain a lifestyle even close to what you are accustomed to, you need to make other arrangements. On average you can expect to live for at least another 20 to 30 years assuming you retire at age 65.

How can a pension plan benefit me?

Whether you are employed, self-employed or a company director, funding one’\s pension is the most tax efficient form of savings that you will ever experience.


What are the tax benefits?

• Tax Relief on your contributions
• Your Investments are free from Income Tax, Capital Gains Tax & DIRT.

The older you are the more generous the limit that applies. For a 60 year old earning €75,000 per annum, tax relief is given on contributions up to €30,000 per year. The relief is given at your highest rates of tax. In the same example if you’re paying 41% tax, contributing €1000 per month, the actual cost to you will be €590.

How much should I pay?

You need to decide how much to contribute in order to give you the desired income you want when you retire. Naturally, the more you pay and the earlier you start paying, have a huge bearing on what you can hope to build up in your nest egg. If you think of your pension like climbing a hill, the longer you put it off, the steeper the hill becomes...

How much you need to contribute each year (before tax) to reach you pension target

In the chart above, a 35 years old person on a salary of €40,000 should contribute €5,200 gross per annum (€433.33 gross per month or €255.47 net of tax relief). This is estimated to provide a pension of €20,000 pa.

Types of Pensions

• Personal Retirement Savings Account

Personal Retirement Savings Account PRSA?

• A personal pension plan that you take out with an authorised PRSA provider.

 Who can take out a PRSA?

PRSA’s are available to you regardless of your job or employment
status. Therefore, you can get a PRSA if you are a part-time or casual
employee, a highly-paid professional, self-employed, a homemaker,
a carer, a contractor, an employer, an employee, a partner in a
partnership, or a jobseeker.

Employers PRSA obligation

As an employer, you should provide access to at least one PRSA if you’re employees are not already included in a company pension. If you only have certain employees in your company pension you also need to provide access to a PRSA for the other employee’s. They are simple and hassle free to set up. First Ireland can recommend the most suitable provider for your arrangement. Remember, unlike a traditional occupational pension, you don’t have to contribute to your employee’s PRSA

Personal Pensions

Who can take out a Personal Pension Plan?

You can take out an personal pension if you have, or have had at some stage, relevant earnings. Broadly, Relevant Earnings are earnings from:

• Non-pensionable employment, i.e. earnings from a job that are not being pensioned in a company pension plan,
• A self-employed trade or profession It is important to note:

Contributions and Tax Relief

Normally it is the individual who takes out the personal pension who contributes to the policy. Often this is by direct debit to the insurance company concerned. Each insurance company sets a minimum contribution and you need to contribute at least that amount in order to take out an RAC.

Personal contributions

You are entitled to income tax relief on contributions paid to an RAC.  This relief is normally claimed back from the Revenue in your annual tax return. The maximum amount on which you can receive tax relief is set out in the table following. You can pay more contributions but the tax relief available will be limited.

Investment of contributions

When you take out an personal pension you will have a range of investment options. You should review the information provided on these options carefully before making any decisions. It is important that you periodically review any investment decision taken, especially in the years running up to retirement as you may wish to protect any investment gains made.

Portability

All personal pensions taken out after 6 April 1999, or earlier contracts where the insurance company agrees, can be transferred to another personal pension. This transfer value can also be paid to a PRSA, by mutual agreement between you and the insurance company concerned.

Employer Pensions

Whether you’re an employee or an employer, a director or an executive, First Ireland can give you advice on the best solution for your retirement provision.

As an employer, a company pension scheme is a great way to attract and retain staff.  A company pension and associated benefits is an important part of the overall benefit package for your staff. Some of the benefits that you can provide for your staff are.

• Retirement Benefits

Providing these benefits for your staff is not as expensive as you think. We can help with solutions to control the cost for you and assist with the day to day administration of your scheme. We can also provide expert advice and guidance on your role and responsibilities.

Directors Pension

If you’re a proprietor of your own business a directors pension is a fantastic vehicle to transfer some of your companies wealth into personal wealth in a very tax efficient manner.

Group PRSA

If you don’t provide a company pension for your staff you must provide access to at standard PRSA for your staff and deduct their premiums by salary deduction. We can help you to choose a provider and assist with setting up the facility. There is no responsibility on you to contribute anything for your staff. Remember: This is the Law
Even if you provide a pension for some staff, any employees who are not included in the scheme must be given access to a PRSA. This could arise where you only invite senior members of staff to join your company scheme.

Self Directed/Invested Pensions

Your Self Directed Portfolio is an alternative to a traditional pension fund where the fund manager makes all the decisions. In a Self Directed Portfolio, you can play a more active role in investment decisions, including the selection of exactly what assets to hold, thereby allowing you to plan for your individual personal circumstances.

What investment options are open to me through my Self Directed Portfolio?

Through your Self Directed Portfolio you may choose to invest in a number of different assets which are permitted within predetermined investment mandates. These are subject to change but currently include:

Direct Assets

You can choose to have your pension investment linked to any number of a wide range of quoted stocks and bonds listed on international stock exchanges or you can also choose a cash deposit account.

Direct Property

This option allows you to select an individual property in Ireland or the United Kingdom and purchase the property indirectly through your pension policy subject to certain restrictions. This gives you all the benefits of a pension policy whilst allowing you to benefit from the advantages of property investment.
Bank borrowing of up to 75% of the property value can generally be arranged. You will need to make an initial contribution and commit to ongoing regular payments to your policy in order to repay the bank loan.
Bank loans can be for a maximum of 15 years and must be repayment loans; interest only loans are not permitted. All loans are non-recourse to you.

Unit-Linked Funds

Instead of choosing your own individual assets with your investment manager, you can choose to purchase units in unit-linked funds. In this way, you benefit from the experience of investment professionals who are positioned to identify good investment opportunities.