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Pensions

Saving for your retirement.

Pensions used to be a lot simpler than they are today. You didn’t have the same range of products to pick from. You might have had a choice of only 4 or 5 funds to invest in and at retirement, you only had to decide if you were taking or leaving the lump sum. With the remainder you got a pension for as long as you lived.

Today there are a confusing number of Pension products to choose from. You could have to pick from up to 40 different funds, and when you retire, there are several options to pick from, some with terms and conditions attached, just to add to the confusion.

This is why you need your Broker to help you identify the right Pensions savings plan, assist in picking the right fund, meet you regularly to ensure your plans are kept in line with any changes in your circumstances, and eventually, guide you through your options in retirement.

What is a pension?

A pension is very simply a scheme designed for you to save money. You get tax relief back on what you save, within certain limits, and your savings grow tax free. There is no DIRT tax, Exit tax, or PRSI charged on the growth of your pension savings.

When should I start paying in to a pension?

For many, their pension will be the largest asset they have, outside of their home. For some, it will be a bigger asset than their home. For many of us to have the home we would like, it will require us taking out a 30 year mortgage possibly.

None of us want to be putting a mortgage repayment into our pension, so we should really plan for our retirement as early as possible. Remember, your tax relief will be a great help with this. You do not get this help with your mortgage. For those on the low tax rate, if you save €80, the government will add €20. For those on the high rate, if you save €60, the government will add €40.  This is a refund of tax you have paid. If you don’t save for retirement, that money is gone from you for good.

How much can I save and get tax relief?

If you are making a personal contribution, Revenue will give you tax back on contributions up to a percentage of your taxable earned earnings. (Rental income is not considered an earned income for tax relief purposes). If you are under the age of 30, you can put up to 15% of your taxable earnings into your retirement fund, and get full tax relief. The percentage increases with age up to a maximum of 40% of earned earnings for 60 year olds and over.

If you are in a company, a company could have contributions of 400% of your salary for a male looking to start a pension at age 55 for example. The limits with Company Scheme can vary depending on the number of year’s service with the company, marital status, and if you have retirement funds built up already.

What pension fund should I pick?

You will need help with this. All assets can fluctuate in value up or down, some more than others. It’s important that you have a fund that fluctuates within limits you are comfortable with.

Some customers want active involvement in picking what goes into their fund, others don’t. Some like property, etc. etc. Our job is to see what your preference is, and then put the options to you that fit with your preferences.

Preferences change from time to time, so you also need to revisit this on a regular basis. Too often people look to review only at time of a crash in values. It’s important to review in good times also.

The vast majority of pensions are invested in multi asset type funds. They include property, Shares, Commodities, Bonds, and deposits, but are not limited to that.

There are a few pension where you can have your fund buy individual properties that you pick. Remember, growth on pension funds are not taxed. Rental income, and capital growth are not taxed in pension funds.

The choice you have for investing your pension’s savings is huge. You do need to investigate options, and pick the one that suits you. You will need help with this, and that’s what we’re here for.

When can I retire?

If you are in an Employers Scheme, retirement age may be set at a specific age.

If you have your own private arrangement, you can draw from those arrangements anytime between the ages of 60 and 75. There are a few circumstances, and a few occupations where you can get your pension earlier.

Some self-employed individuals, or owner/directors, may feel they don’t want to retire, but actually cut back their hours. They can draw their pension, and continue to work reduced hours, maybe until the State Pension kicks in. With your own personal arrangements, you can be flexible as to when you draw your pension, as long as it’s within the ages of 60 and 75.

What about my Old Age Pension?

The contributory old age pension from the State is currently €238.20 per week. You have to be age 66 to be eligible. For those born on or after 1/1/55 this age goes to 67, and for those born on or after 1/1/1961, you have to be aged 68 before being eligible for payment.

This pension is not pre-funded. The current work force is paying the bill for the current pensioners. As the ratio of workers to retirees disimproves, this pension is coming under greater pressure. All the more reason for you to look after yourself.

Types of Pensions

Individual Employer/Company Pension and AVC’s

The Individual Executive Pension is suitable for employees, and owner directors who wish to invest towards their retirement. The employer and/or the employee can contribute to the pension with single or regular contributions or a combination of both. Employer and Employee contributions are eligible to tax relief, up to certain limits.

Most Individual Employer pensions are done through Insurance Companies with a range of funds to suit most people’s attitude to risk. Most pensions with Insurance Companies include a life-styling option, which reduces the risk attached to your pension as you near retirement.

With Small Self Administered Schemes, individuals want the freedom to pick the assets they want their pension invested in. There are only a few restrictions in the assets these individuals can choose.  Usually such individuals would have a preference for investing in property. It is mostly Company Owners/Directors who avail of this type of pension.

Retirement can normally be taken between 60 and 70 years of age.

Group Pension

Defined Contribution

Defined Contribution schemes are pensions where the employer normally pays a specific percentage of the scheme member’s salary into a pension fund, and the employee is usually obliged to contribute a similar or smaller amount.  The employer makes no promises about the size of the actual pension that will be paid upon retirement.  Individual members have their own investment ‘account’ and the eventual retirement income will depend entirely on:

  • The number and level of contributions made over the years;
  • The returns achieved by the investment fund(s) used;
  • The term over which the retirement fund accumulates;
  • The charges deducted from the retirement fund;
  • The annuity rates prevailing at the date of retirement

Retirement can normally be taken between 60 and 70 years of age.

Personal Pension

A  Personal Pension is suitable for those who are self-employed or in non-pensionable employment. They can contribute to the pension with single or regular contributions or a combination of both.

You have a choice of a range of funds to suit most people’s attitude to risk. Lifestyling (reducing the risk of your pension fund as you near retirement) is available on nearly all plans.  Tax relief is limited to a percentage of your earned taxable income, starting at 15% if you are under 30, and rising to 40% once you reach 60.

Retirement can be taken from between 60 to 75 years of age.

PRSA

Standard PRSA

Standard PRSAs are individual Personal Retirement Saving Accounts which are a type of defined contribution scheme to which both regular and single contributions can be made.

Policies can be contributed to by all, regardless of employment status. Contributions can be made to the policy by an individual and/or their employer.

PRSAs are a flexible pension contract which allow the individual to carry their benefits from one employer to another and which provide the individual with the ability to increase, decrease or stop their contributions at any time without any penalty.

Standard PRSAs have a maximum fund management charge of 1% and a maximum contribution charge of 5%.

You customers can continue to contribute to a PRSA after they retire, as long as they are not aged 75 or over. The tax relief limits on contributions are the same as for personal pensions.

These products offer varied Default Investment Strategies (very similar to Lifestyling mentioned earlier) as well as a varied choice of investment funds from cash and bonds to managed funds, property and equities. This allows you to select funds that match your retirement goals and attitude to risk.

Non Standard PRSAs

Non standard PRSA are very similar to standard PRSA’s except Non-Standard PRSAs have no limit on charges applying to the policy. You would only use a non standard PRSA if you wanted access to invest in an asset class or to access a fund manager that was not available through the Standard PRSA.

Group PRSA’s

To encourage people to save for retirement, the government introduced the Personal Retirement Savings Account – or PRSA for short.

PRSAs are intended to be:

  • Simple to understand
  • Adaptable to changing circumstances
  • Excellent value for money

A PRSA is suitable for employers:

  • If they want to provide all their employees with immediate access to a pension plan.
  • If they want to offer their employees a pension arrangement with maximum flexibility, high value-for-money and a clear charging structure.
  • If they want a pension scheme that is simple to set up and  administer – without them having to take on the onus of acting as, or appointing, a trustee.
  • If they have an existing group pension scheme, but want to offer the members the opportunity to pay extra contributions, in order to increase their benefits on retirement. (Additional Voluntary Contributions PRSA)

Through a Group PRSA, we can help an employer design a plan that matches the company’s needs – so that the employer can achieve the maximum possible benefit from establishing and running the plan.

Non-Standard PRSAs are individual Personal Retirement Saving Accounts which are a type of defined contribution scheme to which both regular and single contributions can be made.

Policies can be contributed to by all, regardless of employment status. Contributions can be made to the policy by an individual and/or their employer.

PRSAs are a flexible pension contract which allow the individual to carry their benefits from one employer to another and which provide the individual with the ability to increase, decrease or stop their contributions at any time without any penalty.

You can continue to contribute to a PRSA after you retire, as long as you are not aged 75 or over.

Pension Bond (Buy out Bond)

A Retirement Bond is a single contribution policy which is used to transfer a company pension scheme fund when leaving that employment. Sometimes, it is called a Buy Out Bond or a Personal Retirement Bond. It is a portable pension pot that is bought by the trustee on behalf of the member, which they then own and have complete control over.

You can avail of a range of funds to suit most people’s attitudes to risk and their plans for the future – including lifestyling options.

Retirement can be taken from between 60 to 70 years of age.

Using your pension to buy a property.

Some of the customers we meet have a very strong preference for investing in property. Buying property through you pension can have significant tax advantages.

You can set up your own pension. You can choose the property you wish to buy.  You transfer funds from your company into your pension and claim Corporation tax relief.  Your pension buys the property. Rents are then paid into your pension tax free. See table below.

In the example above it is assumed that 4% rental income is net of property Management fees & any other charges. The figures are for illustration purposes only, and are not guaranteed.

This option is available to owner directors who are looking to extract funds tax efficiently from their company, or may have funds accrued in a pension fund already.

It may be possible in some cases for your pension fund to borrow to buy property although terms & conditions apply.

Call us to see if this option would suit you.

I’m aged 64. I’ve no pension. I’m handing business to next Generation. There is some cash in Company I would like to extract.

From a Company pension it may be possible to take a tax free lump sum from a pension. So if your salary was 50k for example, you might be able to transfer up to €75k from your Company into your pension. Then you can retire, and draw your €75k from your pension tax free. Terms & conditions do apply. Talk to us to see if this option would suit you.

Funding a pension is also very important for family businesses where the next generation will eventually be taking over. It is important that the current directors are in a position to be financially independent when the time for handing over happens.

It is often the case that no planning has been done, and the business may not be capable of financially supporting two generations. Having a fund to fall back on gives the parents the option of cutting back on hours, and doing a gradual hand over without placing an undue financial strain on the business.

This has been a particular problem for some in the farming community also.

Our Approach

Choosing a pensions partner is one of the most important decisions an employer, or individual can make. It is our role to help you through the process and to review on an ongoing basis to ensure you have the best plan available at that time.

The service and administration proposition

At Lloyds Insurances the ‘personal touch’ is all about what we do for you, and how well we do it.  By working in partnership with you, our ‘can do’ approach will ensure smooth administration and ongoing management of the scheme.

The investment strategy

The highs and lows of the world’s stock markets underline what we all need to keep in mind  – namely that every investment carries some degree of risk. That’s why when you choose Lloyds Insurances as your pension partner you can have the confidence in expertise and experience, that we’ll have the right investment strategy for your circumstances.

The design of the Pension scheme

At Lloyds, we don’t believe in the ‘one size fits all’ approach to designing a pension scheme.  We place flexibility at the core of our recommendations, ensuring that we have the right solution for you.

Call Lloyds today 01 531 0900 or request a quote online for best advice on flexible options on Pensions and Investments in Ireland.

 

Company Information

Lloyds Insurances Ltd

Company Number 495597

Lloyds Insurances Ltd is regulated by the Central Bank Of Ireland

Contact details

E-mail address:
info@lloydsinsurances.ie

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