Retirement Planning

Retirement Planning | Retirement Planning Advice | MMPIIt is absolutely understandable that once the words “pension” or “retirement planning” are used in conversation the vast majority of people become disinterested. The very word conj

ures up images of old age and loss of income. This is unfortunate.

A pension is essentially a way of producing a level of income for yourself in retirement. The State will provide a certain income but it may be substantially below your current standard of living. Therefore, you should try to put aside a certain amount during your income-earning years so that you have additional income in retirement.

State Pension

The Irish Government decided that in order to address the future sustainability of the state-backed pensions system, the State Pension (Transition) was to be discontinued in 2014, thereby increasing State Pension age for all to 66 years. As agreed under the EU/IMF Memorandum of Understanding, these changes were legislated for in the Social Welfare and Pensions Act 2011.

Frequently Asked Questions About the State Pension

What changes were made to the pension age in 2014?

From 15t January 2014 the State Pension age increased to age 66. State Pension (Transition) currently payable from age 65 to 66, has been discontinued.

Apart from the change in 2014, what other changes are being made to the State Pension age?

From 01 January 2021 the State Pension age is increasing to 67.

From 01 January 2028 the State Pension age is increasing to 68.

Who is affected by the changes to the State Pension age?

For all those born between 01 January 1949 and 31December 1954 inclusive, the minimum qualifying State Pension age will be 66.

If you were born between 01 January 1955 and 31December 1960 inclusive, the minimum qualifying State Pension age will be 67.

If you were born on or after 01 January 1961 the minimum qualifying State Pension age will be 68.

However, most people today will enjoy many years of life after retirement age. Therefore, it is vitally important that a properly designed pension plan is established in order to provide financial security for these years – over and above what might be provided by the State.

MMPI advises on retirement planning for companies and individuals, whether they are employees, self-employed, company directors or employers.

Individual circumstances and any existing pension provisions are assessed, as are the lump sum and retirement options, the current tax implications, tax reliefs and all of the other aspects of pension planning.

With the various changes to pension legislation over the past several years there are now several options available to most retirees. There was a time when your only option at retirement was to accept a retirement income for the rest of your life – a so-called annuity. The level of this income was determined solely by your employer or by a pension actuary; and the income ceased abruptly on your death.

But today you have the option to retain your savings in a retirement fund and to draw down income at your choosing. Furthermore, on your death, your savings may pass to your spouse and your estate.

Outside of the State Pension, pension products can be broken down into pre-retirement funds and post-retirement funds as follows:-

  • Group Pension
  • Personal Retirement Savings Account (PRSA)
  • Executive/Personal Pension
  • Self-Directed Pension
  • Post-Retirement – Approved Retirement Fund

If you believe you require further clarification on any matter relating to pensions or retirement planning please feel free to contact us for impartial advice.

Group Pension

A group pension scheme is run by trustees on behalf of employees. Each contributing employee has an individual “account” within the scheme.

Pension contributions are taken directly from your salary and paid by your employer to the life company where they are invested in investment funds until you start taking your pension benefits later in life – and when that time comes, you will use the pension savings that you have built up to give you a regular income in your retirement.

Saving for a pension is the most cost effective way of saving because it is very tax efficient.

If you believe you require further clarification on any matter relating to group pensions or retirement planning please feel free to contact us for impartial advice.

Personal Retirement Savings Account (PRSA)

A Personal Retirement Savings Account (PRSA) is a long-term personal retirement account which is designed to enable you to save for retirement in a flexible manner. A PRSA is a contract between you and a PRSA provider in the form of an investment account. With a PRSA you are allowed to change employment and continue to use the same PRSA. You can also switch from one PRSA to another at any time, free of charge.

There are two types of PRSA. Standard PRSA; where the charges you pay are at a set level and there are restrictions on how your money is invested. Non-standard PRSA; where there is no maximum level on thecharges you pay and there are fewer investment restrictions.

A standard PRSA is likely to meet the needs of most people. The maximum charges you can be asked to pay are 5% of contributions paid and 1% per year of the value of your PRSA fund.

If you put your money into a standard PRSA it is invested only in pooled funds. This is a type of fund, where the risk is spread across a large number and type of investments.

Do you need a PRSA?

To see if you need a PRSA you must be in a position to answer some questions.

Is there a good pension scheme available to you through your job? If not, you need to make some provision for your retirement and, therefore, you could consider a PRSA.

If you already have good pension arrangements you may not need to invest any more money; or you may want to top-up your pension fund by making Additional Voluntary Contributions (AVCs).

If you believe you require further clarification on any matter relating to a Personal Retirement Savings Account (PRSA) or retirement planning please feel free to contact us for impartial advice.

Executive/Personal Pension

As a company director or company owner, you probably view your share in the business as your pension when you retire. While th

is is one way of providing a source of income in retirement, there is no guarantee that it will provide you with the standard of living you are currently accustomed to throughout your retirement years.

An Executive Pension allows you to provide for your pension fund independently of the company assets and its future profitability. And it is designed specifically to take full advantage of the generous tax relief that is granted to Company pension arrangements.

If you believe you require further clarification on any matter relating to executive pensions or retirement planning please feel free to contact us for impartial advice.

Self-Directed Pension

Self-directed pensions are suitable for anyone;

  • who is prepared to take a risk with regard to their pension
  • who likes an element of control, and
  • who likes to invest in specially selected assets

It’s for people who are looking to treat their pensions a bit more like their own money.

A Self-directed pension will provide you with;

  • The opportunity to make provision for yourself and your dependants in the future
  • The facility to buy and sell the investments that make up your pension fund
  • A tailored pension fund to suit your objectives
  • Generous tax treatment
  • A very attractive option due to generous individual pension contribution limits
  • A one to one relationship with a stockbroker
  • A daily online valuation of your pension fund from a leading pension provider

The Advantages

Control – You can direct how your pension fund is invested and managed.

Choice – You can choose from an extensive range of asset types including: equities, government and corporate bonds, collective investment vehicles, etc.

Flexibility – You can alter the structure of your pension fund investments at any time. You may also be eligible to invest some/all proceeds of your pension fund in a Self-directed ARF post-retirement and continue to retain control of the fund management and level of income drawdown.

Tax Efficiency – The tax advantages are considerable. They include the income tax relief for pension funding and the tax-free growth of your pension fund. You may also be eligible to take a tax-free lump sum on retirement.

If you believe you require further clarification on any matter relating to self-directed pensions please feel free to contact us for impartial advice.

If you believe you require further clarification on any matter relating to approved retirement funds or retirement planning please feel free to contact us for impartial advice.