In this edition of Irish Building Magazine, we look forward to a New Year, a new decade and what might the future the hold in the pensions’ world.
It doesn’t seem that long ago since we celebrated the arrival of the new century and now we are into the 3rd decade of that century – time marches relentlessly on. As we settle into 2020 maybe now is a good time to reflect on the impact that time has had on our lives and to consider the future and what it may hold for us, in the pension’s world anyway!
Normally, around this time of year we ponder on changes we can make in our daily lives and if you do not have a pension plan then maybe starting one could be one of your better New Year Resolutions. You may not feel that you need to save for your retirement but here’s 3 things to consider – The State Pension amount, service gaps and longer life expectancy.
THE STATE PENSION
Firstly, think of your annual take home pay which you currently live on. Now, compare that figure to €12,912. Could you live on this amount a year? That’s the maximum State Pension amount for a single person. Will this amount enable you to do all those things on your bucket list that you’ve planned for when you’re finished work? I’ve heard the drop in income from the time you are working to the day you go on to state benefits being described as falling off a cliff. Not a pleasant image and certainly something we all want to avoid if we can.
SERVICE GAPS
During your career, have you already or do you plan to take a break for one reason or another? Maternity or paternity leave, home care, rearing of children? This can affect state pension entitlements and can also reduce the number of years you have to save towards your retirement.
LONGER LIFE EXPECTANCY
On a positive note, our life expectancy is increasing; 50% of those born today are expected to live to 100. And indeed some of our CPAS pensioners are over the age of 100 with the oldest being 105! As well as this, the state pension age is increasing and will be age 68 by 2028. While living longer can be good news, what this also means is that our savings have to stretch further and last a lot longer. That €12,912 a year just isn’t going to cut it.
TAX INCENTIVES
The government want us to save for retirement so what incentives have they given us? Often going unnoticed because people pay pension contributions from their salary at source, the tax break on pension contributions is one of the most generous available from the Revenue. Tax relief is available at your marginal rate of tax and the table below shows you the net cost of a €100 pension contribution based on your current rate of tax.
And the tax breaks don’t stop there.
Employer contributions receive corporation tax relief as they are offset against profits before tax and they are not added to employee’s salary as a Benefit in Kind. Investment growth on pension fund savings is tax free and at retirement, members can receive a sizeable amount of their fund as a lump sum also tax free (subject to Revenue maximum limits). Annual pension income is subject to tax under the PAYE system but as a pensioner the tax allowances are generous.
NEXT STEPS
Now is the time for the construction sector to make a difference to the future of all their employees through pension savings. CPAS can facilitate this on the same terms as site workers through the Construction Workers Pension Scheme or we can design a bespoke arrange for individual employers and members through the Construction Executive Retirement Savings (CERS).
PLANNING FOR THE FUTURE
As in life, there are many variables and changes. Planning for retirement and protecting your financial future involves forming expectations about income and expenses over the rest of your life, based on present assumptions. As the pension administrator for pension schemes in the construction industry, we have a range of solutions to help you prepare and protect your future investments. Whether you are self-employed, running a large company with multiple staff requirements, looking for life and income protection, we can help.
For more information and to find the right solution for you, contact our team for a no obligation discussion. Our team of financial specialists will put you in touch with the right team member. No obligations, no hidden fees, no jargon – just a straight forward chat to help you secure your present and your future.
Contact us via email (info@cpas.ie) or by phone (01) 223 4949
