Pensions & Retirement Planning
Pensions

A pension is money that you live on once you stop working. Essentially it replaces your pension. There are a number of tax advantages to making contributions to your pension plan.

There are many different pension plans to choose form.

Personal Pension Plan (PPP):

This is a pension plan you pay from your personal bank account, often used for self-employed people. You claim the tax-relief each year which reduces your tax bill. 

Personal Retirement Saving Account (PRSA):

This type of pension is often offered to PAYE workers whose employers don’t have an occupational scheme in place. All employers must legally offer a PRSA at a minimum, which means you can contribute to a PRSA via salary deduction and get tax relief at source. This PRSA can be moved from one employer to another should you leave employment. You can also arrange a PRSA and pay via your bank account and claim the tax relief at the end of the year.

Executive Pensions:

This is a pension that is set up by an employer for its directors and employees where employers have to make a contribution. 

Personal Retirement Bond:

This is a personal policy which allows you to invest single contributions. It is typically taken out by anywho who is leaving a company scheme and wants to transfer their funds to a personal policy after they leave the company. It can also be called a Buy Out Bond (BOB) or a Transfer Bond. It allows you to access your tax-free lump sum from the age of 50. 

Annuity:

When you reach retirement, you take a percentage of your pension pot as a tax-free lump sum. The remainder is then used to purchase an ARF or Annuity. An annuity guarantees you an income for life. The amount left over after the lump sum is paid is given to a Life Insurance company who will pay you a particular amount per month until you die. The pension will cease when you die but depending on the annuity plan selected, your spouse may receive a pension. Annuity rates are very low at the moment as they are linked to interest rates. 

Approved Retirement Funds (ARF):

ARFs keep your pension savings invested after you retire and give you the freedom  and flexibility to withdraw money as and when you need it. You must take out at least 4% of your fund every year when you are aged between 60 and 70. This then increases to 5% when you are over 70. All withdrawals from your ARF are subject to normal income tax and levies. You have control over what your ARF is invested in but it’s very important this is managed correctly as unlike an annuity, you are not guaranteed an income and your ARF can run out during your lifetime. The balance of you ARF is passed on to your estate in the event of death. 

There are two stages to a pension:

Pre-Retirement

As people are living longer and healthier lives, it has never been more important to prepare for your future. Retirement is a time that you have worked hard for and a time to do the things you have always wanted to do. Have you thought about your retirement years and if you will have enough money to enjoy your retirement?

The state pension is only €12,651.60 per year which is €243.40 per week which you are entitled to from the age of 68, which is very likely to increase in the coming years. 

This stage is when you put money on a monthly basis for long-term savings. The taxman helps by giving you back either 20% or 40%, depending on your rate of income tax. 

This money is then invested – this often frightens people but don’t worry – we will ask you to complete a quick risk questionnaire which will give you a score between one (low risk) and 7 (high risk). This shows us your aptitude towards risk and we can then consider funds to suit your risk profile. Not only do you get tax relief on contributions, but you also get tax free growth on contributions. So your money grows tax-free until you reach retirement.

Post-Retirement 

 

Once you have reached your retirement age, you get a tax free lump sum and then you can take the rest as income ( which is taxed at normal rates) by purchasing an annuity or an ARF. 

We understand that pensions are confusing with so many options available, we are happy to guide you through these options to find the perfect plan to suit your retirement goals – regardless of what stage of life you are in. Complete the form below to speak to a member of our team today. 

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