How to engage your workforce with the value of a pension pot

In a now annual tradition, as the CIF celebrates International Women’s Day with a view to inspiring inclusion and expanding the construction workforce. In the latest Construction Magazine, Susan O’Mara from CPAS looks at the Pension landscape for women and where Employers can add value.

Pension Coverage

The CSO regularly reports available data for Pension coverage in Ireland, with current data up to date as at Quarter 3 2022. The CSO looked at pension coverage in the State for persons aged 20 to 69 years. It found that as of Q3 2022, 68% of men were covered compared to 65% of women.

By contrast, the same survey, carried out in Q4 2005 found that 60% of men were covered versus 51% of women. Coverage has grown for both over the years, with increases in coverage for both women and men over the period.

However, despite this, research carried out by Irish Life in 2019, found that Irish women were retiring with smaller funds than men. There are several factors that contribute to this, which I have both written and spoken about in the past – however, the clear message is that pension coverage and pension adequacy are not the same thing. When you retire, will the value of your retirement fund be adequate to fund your desired lifestyle?
It is important for women (and men) to engage with their retirement planning and to think carefully about whether they are saving enough for retirement.

Employers, particularly those seeking to attract and retain staff, have an opportunity to be a part of the solution to pension adequacy. I have outlined below some key tips for employers to engage the women (and men):

  1. Construct an occupational pension scheme that is a key part of your employee benefits package and get employees engaged from the start. Your pension offering should be part of your recruitment conversation and the finer details should be included as part of your induction process.
  2. Ensure that your pension communications are clear and not full of “jargon”. One of the reasons employees find it hard to engage with the topic of Pensions is that the information can be focused on pension jargon and regulatory information. Developing simple and clear messaging around your pension offering and its value will greatly benefit employee engagement.
  3. Provide pension and financial education for your employees. This can be done via regular pension scheme updates, webinars and even one-to-one sessions. Having delivered many of these types of sessions for employers, I have enjoyed my experience over the years in witnessing that “epiphany” moment when people understand not only the importance of saving for retirement but also the significant value of the employers’ contribution to their retirement outcome.

 

A workforce engaged with the value of their occupation pension scheme through employer efforts can lead to improved employee health and wellbeing and increase employee engagement at work, while also ensuring that when employees come to retire, they can secure a more comfortable income to live on.

CPAS are the specialists when it comes to pension provision and financial advice for employers and staff in the Construction sector.

CPAS administer the Construction Workers Pension Scheme and the Construction Executive Retirement Savings (CERS). 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 For the latest updates, subscribe to our newsletter here.

Retirement, the beginning of a new life journey

Our staff writer at CPAS explores one of the avenues. Retirees often see retirement as a destination when it is in fact a turning point to the beginning of a new life journey. In today’s world, where people are living longer, there are more opportunities than ever for retirees to enjoy life, pursue their interests, make meaningful contributions and nurture relationships.

As you prepare for retirement, it is crucial to map these key lifestyle factors:

What legacy are you building?

Planning for retirement provides an excellent means to create a legacy that lasts. It offers financial security for loved ones and is tax-efficient. Legacy building is not necessarily about leaving behind monetary assets. It can consist of passing down a family’s history, values, or heirlooms to the next generation, or it could involve drafting a will, selecting beneficiaries, or contributing to charitable causes. The important part is understanding the type of legacy the individual wishes to leave.

Do you have goals, dreams, and aspirations?

Driven retirees who set specific goals experience a renewed sense of purpose and direction. By establishing long-term objectives, individuals are encouraged to take decisive actions over an extended period. It is about developing a plan that motivates retirees to make choices, track their progress, and have something to look forward to. Reflection on the transition and envisioning the next phase of life, encompassing both financial and non-financial goals, is essential.

What is your relationship with money?

Your relationship with money profoundly affects your ability to build up wealth and savings for retirement. Unlike when they were working, retirees no longer have the luxury of time. It is therefore important to explore financial habits and attitudes that may subconsciously influence decision-making. Recognising this connection with money and addressing any barriers is critical.

Are you ready to navigate the lifestyle transition?

Retirement is a significant life journey transition. It requires retirees to find purpose in the next phase of life. This transition is often a solo journey. Financial advisors play a crucial role in helping retirees set new goals, manage their emotions, and redefine their identities. Together, they plan for a joyful and exciting transition into the post-work years.

Pit stop

If you take these factors into consideration and incorporate Additional Voluntary Contributions (AVCs), you will top up your pension savings and benefit from valuable tax relief. AVCs are a smart, tax-efficient way of saving for retirement. Relief from income tax on AVCs is allowed at a marginal rate. If you’re taxed at 40%, an AVC contribution of €100 will only cost you €60 net and €100 will be credited to your pension account. Should you be taxed at 20%, a €100 contribution will only cost you €80 net and €100 goes into your pension arrangement. Ensure a financially secure and fulfilling retirement journey; our team at CPAS will be delighted to guide you. For further information, visit https://cpas.ie/avc, or please contact us at (01) 407 1400 or by email at info@cpas.ie. For the latest updates, subscribe to our newsletter here.

Are you over 50?

In the latest edition of Irish Building Magazine , Susan O’Mara of CPAS explains why now is the time to take control of your retirement planning.

If you haven’t already started saving for retirement, it’s not too late. The current tax relief available within the pension framework was designed to allow older people save more money. As you can see from the table below, from age 50 the percentage of your salary, on which tax relief is available, increases from 30% up to 40% by age 60. This is capped at an earnings limit of €115,000.

If you have already started saving and have built up some level of retirement fund, it is important to actively review your pension and take the necessary steps to optimise the financial outcomes, well in advance of your retirement age.

Do you regularly read your benefit statement?

Irrespective of the type of pension arrangement that you have, you will be receive an annual benefit statement from your pension provider. For the majority of people, the benefit statement is filed away for review at another stage. This document not only sets out the value of your pension fund on an annual basis, but also some helpful illustrations of what the value of your fund will be at your retirement date. These “future projections” should inform the actions you take now, whether it allows you to relax, knowing your fund is healthy, or try to make additional contributions.

How are your retirement savings invested?

Your benefit statement will also tell you how your money is invested and the choices you can make regarding this investment (known as your “Fund Choice”). A large proportion of people don’t deviate from their initial choice, or the default provided over the course of their working life. It is with this in mind that many pensions fund providers these days provide a “Lifestyle Strategy” built into them as a default.

A Lifestyle strategy ensures that the fund in which your retirement savings are invested in will automatically change its asset mix, on a gradual and regular basis as you move closer to your normal retirement age. Typically, these are structured to reduce the investment market risk in the run up to retirement. With many funds, the inbuilt Lifestyle strategy will take effect in the mid to late 50’s, for others it could be as early as 50. It is important to know if this applies. It is also important to know if it fits in well with your post retirement plans. Which brings me to my final point.

What to do with your money at retirement?

There are different types of pension vehicles on the market and as such, there are different ways pensions are calculated at retirement. Understanding your options will be an important factor in decisions you might have to make in advance of your retirement. If you are in a standard defined contribution company pension scheme, for example, you will have the option of taking a tax-free lump sum and using the balance to buy either an annuity or investing the balance in an Approved Retirement Fund (ARF).

Annuity versus ARF

More people than ever before are opting for the latter, but what are the differences? At a basic level, the annuity option is essentially taking the value of your retirement savings at your retirement date and giving them to a provider in return for a guaranteed income. The income that you will receive is dependent on your fund value, your age and health. In some instances, some additional bells and whistles can be added on.

On the other hand, the ARF is keeping ownership of the fund and investing it further, while drawing an income from it throughout your retirement. There are advantages to both options and choosing the one that suits you is based on a range of individual factors.

However, having at least some idea of what you plan to do is important, particularly where your investment fund choice is concerned. If you are most likely planning to invest in an ARF, you should ensure that the fund, in which your money is invested, in the run up to retirement, is not geared towards an Annuity – this is where your benefit statement comes in!

Finally, you should be aware that if you are in your 50’s, the State Pension, which forms a substantial part of post retirement income for many people in Ireland, is only available to you from age 66. If you are planning to retire earlier than that, this must be factored into your retirement plans. These small few steps can make all the difference to your income when you finally do retire.

Planning for your 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 straightforward chat to help you secure your present and your future.

Contact us via email (info@cpas.ie) or by phone (01) 223 4949.

The Future of Pensions

In this edition of Construction Magazine, John Geraghty looks at the future of pensions.

The scientific evidence is clear and unambiguous: people are living longer and fewer babies are being born in Ireland. Science does not lie and neither (in this case), do the numbers. According to the 2021 fiscal report from the Finance Minister Pascal Donohoe, there are currently around four people of working age to support each person aged 65 and over. This number is expected to fall to just over two by 2050.The analysis highlights the need for serious policy considerations in this area.

IORP II – A brief summary

The Minister for Social Protection signed legislation on 22nd April 2021 which officially transposes the Second European Pensions Directive (known as IORP II) into national law. This action is part of the wider Road Map on Pensions Reform (2008 – 2023). The arrival of the IORP II regulations brings into force a series of wide-ranging legal requirements and governance standards. This should be of particular interest to pension scheme trustees and employer sponsoring pension schemes, either acting as trustees or paying for professional trustee services. It is hoped the new rules will ensure that trustees have the necessary powers and credentials for proper supervision of schemes – thereby protecting members and their investments.

The Pensions Authority expects all schemes to be fully compliant with all IORP II requirements by 1st January 2023. Employers and trustees should review their options and put in place an appropriate plan to become IORP II compliant in advance of the 1st January 2023 deadline.

One member pension arrangements

Ireland has a high number of one-member pension arrangements that operate under a trust system that now fall under IORP II. For many years, business owners have had the option to save for retirement using trust-based one-member pension arrangements. These gave flexibility in saving for retirement, recognising the requirements and the peaks and troughs in business. The Pensions Authority have warned that trustees of such schemes face prosecution from 1st July 2022 unless they comply with the new rules. While the introduction of IORP II has brought additional layers of security for one member pension schemes, increased regulatory costs make it prohibitive and life assurance companies have suspended accepting new one member schemes.

The introduction of IORP II has led employers to explore alternative compliant options in the marketplace such as master trusts and multi-employer schemes for providing retirement benefits and outsourcing all aspects of management and regulatory compliance. Both master trusts and multi-employer schemes have their own appointed trustees and governance is managed centrally, which removes the hefty responsibility from the employer.

JOHN GERAGHTY, QFA SIA PTP
John Geraghty, QFA SIA PTP

The nature of both arrangements allows them to be flexible and evolve, so any new regulatory and governance requirements will be managed by the scheme and its trustees. Employers retain control over their benefit structure and the level of pension contribution that applies to its own plan, while trusteeship (along with the associated governance and compliance responsibilities) is delegated to a professional trustee board.

CPAS can help navigate your company through an ever-changing pension environment. If you are concerned about your IORP II obligations and what it means for you and your organisation, please contact our dedicated team on 01 2234947 or email j.geraghty@cpas.ie

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.

Mind the (Gender) Pension Gap : Construction Magazine

In the latest edition of Construction Magazine, celebrating International Women’s Day, CPAS looks at some of the challenges faced by women when it comes to pensions.

This month, the CIF hosted an in-person event celebrating International Women’s Day. As one of the speakers commented, it is not just about one single day in the calendar – it is about working to secure a better future for all. As a pension administration company, CPAS is focused on the future – specifically, the future of our Members. We help them save for life after work, enabling them to live comfortably with a stable financial footing throughout their retirement.

The current inflationary pressures will mean many people will see extra demands on their income. This coincides with also having to prepare financially for their long-term future. This future financial stability relies on retirement savings in order for it to be comfortable and secure. We understand the financial pressures people face and work with Members to help them understand the impact they can have on their future by making even the most modest of contributions to their pension savings. Each year for example, we remind our Members about the invaluable tax relief that is available by making Additional Voluntary Contributions (AVCs). This small step can make a big impact in the future. In fact, AVCs are also referred to as “rocket fuel”. AVCs allow Members to increase individual pension funds by maximising the tax relief they are entitled to on contributions. The limits on pension tax relief are broken down in specific bands based on age. So, for example, someone aged 33, can avail of tax relief on anything up to 20 per cent of their income that is contributed to their pension fund.

Not just an Irish issue

While everyone should be considering making the most of their pension savings by contributing what they can afford, global trends do show gender inequality still exists when looking at pension provision. According to research carried out before the pandemic, women in Ireland experience an income gap of 37% in retirement compared with their male counterparts.

There are many reasons for these inequities and while companies are not expected to resolve these challenges, there are things companies can do to help staff – mainly around acknowledging the challenges that exist and educating staff about the benefits of pension savings. Some of the impacts of gender inequality can be reduced by encouraging women to join the company pension scheme early and making pension contributions (no matter how small), consistently. However, this can only make a small dent against a greater societal challenges that exist. Pension gaps are created in a number of circumstances, including:

  • Service Gaps: There are numerous reasons why women take career leave. Statistics show that more often than not, caring in the home generally falls to women. This was amplified during the pandemic. Whether that is maternity leave, child rearing and caring for sick family members– women often take time out of the workplace and as a result, their pension savings suffer. These service gaps can also negatively impact their pension entitlements which is something that can be overlooked.
  • Pension Coverage: Two thirds of women in Ireland do not have private pension cover. Employers could help address this by informing staff of the benefits, helping staff understand the tax benefits of saving for their retirement and ensuring staff are maximising the generous pension schemes that employers have in place.

Why women should care more than men?

Pension savings should concern both genders equally. However, (according to HSE figures 2020), women live on average four years longer than men in Ireland (84.1 years for women versus 80.5 years for men). This means that their pension savings must last longer than those of their male counterparts. Furthermore, the number of people aged 65 years and over in Ireland has increased by 35.2% since 2009. This is more than double the EU average of 16% in the same period. This could negatively impact the ability of the State to support pension age adults with the same level of pension cover annually.

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

Pensions: Expectations vs Reality

The last 18 months has taught us a lot. We realised the importance of hand hygiene, the incredible work our medical professionals do on a daily basis and the joy in simple things like a pint in a beer garden or embracing a loved one. This pandemic has been painful and heartbreaking in parts but it has also shown how resilient we are as a nation and how integral the construction section is to our economy and our recovery.

NAVAL GAZING AND CRYSTAL BALLS

The pandemic gave us time to think and reflect – about our careers, our families and the precious moments we missed.

We are not clairvoyants, but as the economy reopens, many of us are looking to the future, some with hesitancy but for most of us, it is with a renewed sense of optimism.

Some may question our sanity discussing pensions during a pandemic. But as we try to deal with the here and now of daily life, it’s important not to lose sight of the future. In fact, pension reform was one of the main issues raised in the February 2020 election (we know, it feels like an age ago now). We were and still are concerned about our futures in retirement and providing a good standard of living for ourselves.

Regardless of your age, the size of your pension pot or your current situation – we all look to our future retirement with a sense of optimism. We imagine getting rid of the 6am wake up call, the ability to pack our bags and travel at the drop of a hat, spoiling grandkids, taking up a new hobby or finishing that project you have not had time to complete in recent years.

MAKING ENDS MEET

All those optimistic hopes and daydreams will be out of reach for many on the State pension. While we do not relish in the doom and gloom of future finances, it is important to point out that the State pension (currently just under €13,000), will only provide for living expenses. The government want to ensure retirees can afford to live but the State Pension does not guarantee discretionary spending such as holidays, creature comforts and subscriptions to your favourite sports channels. According to the latest CSO figures, 65% of us have accepted this and have additional pension cover to bolster the State pension amount.

YOU MAKE THE DIFFERENCE

Ireland has been facing into a pension timebomb for some time. While these issues are being pushed further and further out by successive governments, there are ways in which the government have helped us to protect ourselves from the potential fallout. These take the form of generous tax relief, which is available and actively encourages us all to build up retirement savings for a healthier pension amount. These measures may face restrictions in the future, but for now, they are a great way to save on tax while saving for your future.

TAKING CONTROL AND GETTING BACK ON TRACK

Setting goals and looking into the future is often the easy part – making the plan and sticking to it can be trickier! Pandemic aside, we understand that school fees, a veterinary bill or car repairs can derail the best-laid plans. With that in mind, we have outlined three straightforward starting points you might consider following to get you on the right track to a better life in retirement:

  • Understand the now: Knowing what you have currently in terms of assets, savings and pension pots is the first step we would advise you to take. You may have contributed to various pension pots over the years of your employment with various employers. Now is the time to track the details down and commit them to paper.
  • Know what you want in the future: This is not just the nice holidays and sports channels. It is important to understand your current expenses that will carry on into retirement. If you have kids, they will (hopefully) have flown the nest (so to speak), before you retire but what about those heating bills, house maintenance, and health expenditure. All these things are important to add to your plan. Knowing what you want from your retirement after that, should be easier. You may need your retirement savings to last up to 30 years after you retire so setting realistic expectations of the lifestyle you want and understanding what you need to have saved is really important.
  • Knowing what to do to achieve those retirement goals: Whether you are banking on a cryptocurrency pay off, hoping a land purchase returns high dividends in the future or selecting a fund for your retirement savings that you hope will make the necessary returns, it’s vital to get advice from a financial expert. When it comes to your pension, the various schemes administered by CPAS (CWPSCIRT and CERS), can help you with your pension. For more general financial advice, we recommend Milestone Advisory. The team there can help you navigate the sometimes perilous and confusing world of finance. This way, you can rest assured, knowing your future hopes and aspirations are achievable.

Time is the most important ingredient in your plan for retirement savings. Start early and reap greater rewards (thanks to compound interest).When you know what you have, what you want and have a plan of action to help you achieve that, stick to your guns. Do not be derailed by the noise and fads. Your plan and your journey should be as unique as you are – so start today.

PENSIONS NOT PRODUCTS

CPAS is the pension scheme administrator for pensions in the construction sector. We do not look at pensions as products, but as the development of strategies, recognising your needs now and into the future. We work with our members to identify a clear vision for the future, achievable goals and then work with them to create a plan of action that they can implement today. It is about providing the right information today to help them make the most of their future.

As in life, there are many variables and changes. Planning for retirement involves forming expectations about income and expenses over the rest of your life, based on present assumptions. Our pension consultants help you cut through the complicated jargon and plan for your future in the long term.

For more information, please get in touch with our team of consultants who can provide more information (info@cpas.ie).

Sources: https://www.lawsociety.ie/gazette/top-stories/65-have-some-pension-cover-as-well-as-state-pension/

Retirement: When Work Becomes Optional

In the first edition of Irish Building Magazine, we look at the year ahead and what it might hold.

This time last year, we wrote about a new decade with the start of 2020 and looked forward to what the next decade might hold. Who knew back then how drastically life would change for us? While many still face into another year of economic uncertainty in 2021, we still firmly believe that planning for your future should still include planning for your retirement.

Life in circles, not lines

Should we fall on hard times, many of us would only be able to live off our savings for a few months (some of us have had to this year). In retirement, we can look forward to living 20 to 30 years. The question is, how long will our savings sustain us? While most of us will receive a pension from the State, this will only secure a basic standard of living and that may differ to the vision of ‘living’ we have imagined.

People often view time as linear. We see it as one-dimensional and narrow, expecting everything to happen in a sequence after which a result neatly appears. By definition, linear living has an endpoint – a finish line. Retirement is not that finish line, nor is it an endpoint. In fact, it is the start of another cycle. It goes through evolving stages that change with time. This circular (as opposed to linear) living requires us to sustain it and the best place to start is a pension. Retirement should not be the end of something, but a point in your life cycle when work becomes optional and you look forward to a future of possibilities.

Your definition of ‘life’ may differ from what the State Pension Offers

The current working population makes the existing State pension possible. According to the National Risk Assessment in 2019, the share of the population aged 65 and over is projected to increase from one in eight to one in six by 2030 and the number of people aged 85 and over, is projected to almost double.

This is an acute concern for government strategists as they struggle to project a sustainable State pension into the future. Furthermore, while Ireland has a comparatively young population relative to other EU countries, it nevertheless faces the same long-term challenges as the rest of the continent with an ageing population. While we are happy to live longer lives, this does put inevitable strain on the healthcare system. As it stands, according the National Risk Register, 60% of those aged over 50 report having at least one chronic condition.

Whether you are 5, 15 or 50 years from retirement age, saving just a small proportion of your salary can help you achieve your dreams in retirement, but most of all, provide you with much needed financial stability. Every January, we look at the year ahead and try to imagine what it might hold. Due to the pandemic and subsequent uncertainty, it is hard to envisage the future, especially our retirement, which might be years away. However, that is exactly what we are asking you to do and, on a State pension alone, that future looks bleak.

The State pension is not designed to provide for your desired future. Its purpose is to ensure a basic standard of living for all retirees nationally. It does not take into account your location, your assets, any chronic health conditions or additional requirements that involve significant investment.

It pays to save

No matter how you break it down, pensions can make for complicated reading. However, the basic idea is simple. Pensions are long-term savings plans that benefit from generous tax relief on contributions (subject to Revenue limits) and grow over time to provide you with sufficient income when you decide to retire. Pensions never cost as much as you think, thanks to tax relief on contributions you make (subject to Revenue limits). For example, if you are on the higher rate of tax and contribute just €100 per week to your pension, this will cost you just €60, thanks to the tax relief you will receive.

Pensions, not products

CPAS is the pension scheme administrator for pensions in the construction sector. We do not look at pensions as products, but as the development of strategies, recognising your needs now and into the future. We work with our members to identify a clear vision for the future, achievable goals and then work with them to create a plan of action that they can implement today. It is about providing the right information today to help them make the most of their future.

As in life, there are many variables and changes. Planning for retirement involves forming expectations about income and expenses over the rest of your life, based on present assumptions. Our pension consultants help you cut through the complicated jargon and plan for your future in the long term.

For more information, please get in touch with our team of consultants who can provide more information (info@cpas.ie).

January: A Time to Reflect and Review

In the latest edition of the Irish Building Magazine, we outlined our belief that retirement is not the end of something, but a point in your life when work becomes optional and you look forward to a future of possibilities. You can read the full article here.

105 YEARS OLD

January is the month when the internet is awash with all sorts of ‘top tips’ for saving money, maximising money, saving tax and any other goals that are linked to the New Year. However, it was an article about babies born in 2021 who are now expected to live until 105 years of age that caught our attention as pension providers. While this impressive age is something to celebrate, it struck a chord about how long our pension savings are expected to last. If you retire at 65 and live until 105, will your pension pot last for 40 years covering you through illness, home repairs, a replacement car and everything else in between?

Financial reviews are important and if 2020 proved anything, it is best to act now to protect against the unexpected. Now is the time to review your finances and look forward to a better year in 2021. For those who plan to retire in the future (i.e. all of us), we think you should start by reviewing your pension.

WHY START WITH MY PENSION?

Pensions are often one of the most valuable assets a person will ever own, so with that in mind, you should start by reviewing your annual pension statement. Even if you only read one or two sections of your statement, it should give you the majority of the information you need and will reveal whether you should be keeping things as they are or look to improve matters. These are four key actions you can take:

  • Complete an “Expression of Wish” form: If you die before you retirement, there could be a substantial payout through your pension scheme. This information will provide the Trustees with guidance regarding whom you would wish to receive this benefit in the event of your untimely death. Contact your pension provider for the relevant form.
  • Consider Charges and Fees: You may think that 100% of your contribution to your pension scheme goes into your pension pot. Not so in many cases. Where the administrative fees are not clear, it is worthwhile reading the small print. In the case of the Schemes administered by CPAS, your full contribution goes into your fund. We can afford to do this as we are a not-for-profit provider. This ensures we are 100% focused on making sure your funds are maximising their earning potential and every cent of your contribution stays in your fund, working for you.
  • Review Investment Choice: As you get closer to retirement age, it’s vital to consider where your pension fund money is invested and is this investment appropriate for your age and risk appetite. For example, does your fund automatically take steps to reduce your investment risk as you get closer to retirement? What happens if you plan to defer retirement for a period of years? Is this approach the right strategy for you? Are you planning to take an annuity or invest in an approved retirement fund (ARF) when you reach retirement age? There are many choices available to you and you should ensure your money is placed in the most suitable fund for your projected needs.
  • Additional Voluntary Contributions (AVCs): AVCs are a great way to boost your retirement savings if you are concerned about your current contribution levels. Going back to our advice about reading your benefit statement, this statement should give you an indication of the estimated income you will receive at retirement. If this is lower that you would like, then paying more to your pension account through AVCs is how you will improve this outcome. If you have money sitting in a current account or low interest bearing accounts, perhaps this is cash better spent securing your future retirement income – by investing it in your pension as an AVC. And the real clincher is that you can avail of up to 40% in tax relief on AVCs, which is particularly attractive if you are in the higher tax bracket.

A CLOSING THOUGHT FOR THE START OF THE NEW YEAR AND GOAL SETTING

When setting your financial goals, remember to be realistic. Take time to make small, achievable financial solutions you can work towards. You can’t spend what you don’t have, but maximise what you do. At a minimum, you should ascertain your end goals. Many of us will want to retire on at least 50% of our annual income and so, you must ask yourself, how much do I need to have saved at retirement age in order to achieve this level of income? Based on a current income of €48,000 and assuming you wish to retire on €24,000, (the State pension is currently €12,912), we estimate a requirement of €300,000 to bridge the gap. How much will you need? Are you are on track to achieve this goal?

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

Divorce and Pensions in Ireland

Divorce, similar to death or taxes, may not be a popular talking point, but when you are faced with this reality, it is worth understanding what is involved in relation to your pension entitlements.

In 1995, the Irish public voted to legalise divorce. A year later, it was written into law. While the rates of divorce have been increasing in recent years, we still have one of the lowest rates of divorce in the world. The crude divorce rate in Ireland is 0.6% a year for every 1,000 people, compared with 1.9% for the UK and 3.2% for the US*.

Why Your Divorce Will End Up in Court

Did you know that after the family home, a pension is often the most valuable asset a separating couple have? The Family Law Act 1995 and the Family Law (Divorce) Act 1996 enable Courts to share out pension rights between separating and divorcing couples.

Regardless of how amicable a separation, pension rights can only be divided by a Court Order. This system can sometimes be seen as complicated. As a result, couples opt to focus on the other assets and leave the pension alone, thereby negating the need for Court intervention. A spouse, a civil partner or a qualified cohabitant (subject to meeting certain conditions) can apply for a Pension Adjustment Order “PAO” at the end of a relationship. For the purposes of this article, I will refer to spouse but the information also applies to civil partners and qualified cohabitants.

Divorce and Pensions – The Process

At the beginning of the process, each spouse is required to give particulars of his/her property and income to the other spouse and this information will include full detail in relation to a member’s benefit under a pension scheme.

After consideration of this information, the Court may serve an order (known as a pension adjustment order or PAO), on the Trustees of the pension scheme of which either spouse is a member. This PAO can require the Trustees to pay a portion of the pension benefits to the other spouse or for the benefit of a dependent member of the family. The PAO requires that the Trustees pay a specified part of the retirement benefits or contingent benefits to the person(s) named in the order.

PAOS May be Made in Respect of the Following Pension Arrangements:

  • Occupational Pension Schemes, in relation to retirement benefits and any contingent benefits (i.e., benefits payable on death in service). This can apply to a current pension scheme or a pension scheme of which you were formally a member.
  • Additional Voluntary Contributions (AVCs).
  • Personal Retirement Savings Accounts (PRSAs).
  • Retirement Annuity Contracts (RACs) including Trust RACs.
  • Buy out Bonds/Personal Retirement Bonds.

It is important to note that a separate PAO is required for each separate pension arrangement in your name. In addition, benefits payable under the Social Welfare Acts and disability benefits arising under an Income Protection policy are not considered pension benefits in the context of the legislation.

Divorce and Pensions – Your Options

Following the making of the PAO, the pension scheme Trustees will notify the person in whose favour the order is made. The Trustees will inform the person the amount and nature of the retirement benefits and/or contingent benefits designated under the order.

How Benefits are Calculated?

Firstly, the Court will rule on two key factors determining the amount. These are the “relevant period” and the “relevant percentage”. The relevant period may refer to the period of and can not be later than the date of granting the decree of judicial separation or divorce. This means future benefits can not be shared.

This information will also include the option of a transfer value that may be available in lieu of keeping the benefit under the existing pension scheme. For example, a PAO may be outlined as follows:

  • The period of reckonable service over which the designated benefit is deemed to have accrued, is the period commencing on 1st January 2005 and ending on 1st January 2015.
  • The relevant percentage of the Retirement Benefits accrued over the Designated Period and to be paid to the Beneficiary is 50%.

In the example shown, the spouse (who is not a member of the pension scheme), will get 50% of the benefit which the member earned in the ten year period shown. The formula for calculating the benefit due will differ depending on whether the pension scheme is defined benefit or defined contribution. In either case, the spouse who has been awarded the PAO will be offered a transfer value. They may also be given the option of establishing an independent benefit within the member’s pension scheme.

Considering Remarriage?

There are some considerations when remarrying. These are:

  • The Court will not make a PAO if the spouse who applies for it has remarried.
  • If a PAO in relation to retirement benefits is made, this will be unaffected by a subsequent change in marital status of either spouse.
  • A PAO in relation to contingent benefits (benefits payable on death in service) cease to have effect if the spouse who is not a member remarries.

Impact of a Member Retirement on the Spouse

If the member spouse retires and the spouse who benefited from a PAO has not transferred their benefit to another pension arrangement or has not established an independent benefit, the non-member spouse must also retire. A PAO must also be considered at retirement in relation to Standard Fund Thresholds and Tax Free Lump Sum payments.

Standard Fund Thresholds: When calculating a member’s threshold limit (currently €2 million), the member’s entitlement is calculated as the total value they would have received if a PAO was never made. If this calculation puts the member over the Threshold, the chargeable excess tax liability is divided between the member and the non-member spouse on a pro-rata basis.

Tax free lump sum: Subject to Revenue regulations, there are formulas for calculating the lump payable to a member on retirement. Currently, up to €200,000 of this lump sum can be paid tax free. Where a PAO exists, there is a separate €200,000 limit for the member spouse and the non-member spouse.

Divorce – A Conclusion

Pensions and divorce can be complex. The outline above offers some brief pointers but every situation is different. It is important that all parties involved are fully aware of all the various conditions and details involved. The Pensions Authority** have information on their website, offering a 46 page “brief” guide to the pension provisions of the Family Law Acts. In the event of an imminent separation or divorce, it is important to seek independent financial advice, in addition to legal expertise.

If you are going through a separation or divorce, our team can help. Simply send us an email (info@cpas.ie) we will be in touch. For financial advice, we recommend the financial consultants in Milestone Advisory DAC. The team in Milestone Advisory offer financial advice with a focus on the construction and related sectors.

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

Sources:

Protect your Finances – Save for the Future

In October, the Construction Industry Federation ran another successful Construction Safety Week. This week each year serves as a reminder about the health & safety of everyone involved in Construction.  The message is ultimately about providing people with all of the relevant information available to enable them to protect themselves. Protecting your finances is something to be mindful of also. The way to protect your finances is to save for the future and to insure against the unexpected.  It is that simple.  It is complicated because there are so many options available to people, but hopefully this piece alleviate some of the confusion.

Saving for the future.

A pension is simply a long-term savings policy with tax relief.  It is the most tax efficient way to save for the future.  If you have access to pension scheme, rejoice!

Life Cover

If you have purchased your own home, you will likely have Mortgage Protection and this is indeed a type of Life Cover.  Mortgage Protection will pay off any outstanding balance on your mortgage if you die and it is designed to decrease as your mortgage decreases.  This is all it is for however, nothing else is covered!  If you have dependants then mortgage protection alone simply is not enough.  Death before old age is an unlikely occurrence, but it happens nonetheless and while we cannot live our lives expecting the worst – we can be financially prepared for it.

Income Protection

Income Protection is an insurance policy that pays your income in the event that you become ill or are injured.  It can pay you until you recover, or until you retire.  I often talk about longevity when I am talking about pensions, i.e. the fact that people are living longer and so the increased need for income in retirement.

From age 65, men can expect to live an average of 23.8 years, while women can look forward to an average of 25.3 years.  While this has an impact on saving for your retirement, it also means that during your working life, being diagnosed with a serious illness is a greater risk to you than death.  The Life Assurance industry claims experience tells us that you are likelier to suffer from Cancer, a Heart Attack or a Stroke before you retire than you are to die before age 65.  In my opinion, Income Protection is one of the most important insurances you can have to protect your finances.

Specified Illness

This is also known as Serious Illness cover.  Why consider serious illness cover? It pays out a cash lump sum if you are diagnosed with an illness from one of the many serious illnesses covered by the plan – illnesses such as Cancer, a Heart Attack, or a Stroke (subject to policy terms and conditions).  This cash lump sum would help remove some of the financial and emotional stress associated with a serious illness, affording you the opportunity to take the time off work, to help pay for specialist medical treatment or even to help cover day-to-day household bills such as childcare.  It may also be used to pay off debts while you are recovering.  If you are diagnosed with a serious illness you have enough to worry about, making ends meet should be the least of your concerns.

Do you need cover?

You should establish what exactly you would do if you were hit by illness or injury.  You should quantify how long your income would continue and how far your savings would stretch. If you do not have any cover in place, and your savings are not enough for you, you might consider reviewing your needs with your financial adviser.

Susan O’Mara, Financial Services Consultant with Milestone Advisory 

For further information please contact Susan O’Mara at: susan@milestoneadvisory.ie or phone: 01-4068020

Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland

Are Pension Savings Only for Construction Site Workers?

It may be well established at this stage that CPAS are considered to be the pension provider of choice for the construction sector, however, it has become quite clear to us in recent times that some might consider the ‘construction sector’ to include only those who work on sites, so we ask the question; are pension savings only for site workers?

Since the introduction of the Sectoral Employment Order (SEO) last year, and the conversations around the #BuildingEquality campaign including the gender pay/pension gaps, we’ve had many discussions with company owners and office staff regarding their own pension provision. These conversations usually take place when they contact us to set up or discuss their site workers’ pensions or when we are arranging site visits to give toolbox talks to their employees in the Construction Workers Pension Scheme (CWPS).

The team at CPAS receive regular phone calls from office staff who manage the pensions for their site workers but they never consider their own savings for retirement. When we ask them about their own pension savings we regularly hear ‘I don’t work on site’, ‘I didn’t think office staff could be included’, ‘I wouldn’t know how to go about it’. It should be said loud and clear – CPAS have a pension solution for the entire workforce in the construction industry.

This includes office staff and management, not just those who work on site. From a survey in 2017, it was found that only a third of private-sector workers in Ireland have a pension plan. Furthermore, 60% of those without pension savings said they don’t actually know how to start one. If you are one of the two thirds who do not have a pension plan in place and think you don’t need to save for your retirement, I give you three points to consider – the State pension amount, service gaps and longer life expectancy.

CPAS

Firstly, think of your annual take home pay which you currently live on. Now, compare that figure to €12,652. Do you think you can you live on this amount a year? This is the current maximum State pension amount. Will this amount enable you to do all those things on your bucket list that you’ve planned for when you’re finished work?

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 or just a career break to travel? If you do, this can affect your State pension entitlements and can also reduce the number of years you have to save towards your retirement.

On a positive note, our life expectancy is increasing; 50% of those born today are expected to live to 100. Indeed some of our CPAS members in receipt of a monthly pension have reached the age of 100 with the oldest being 105! As well as this, the state pension age is increasing and will rise to 68 by 2028. While living longer is good news, this also means that our savings will have to stretch further and last a lot longer. Will €12,652 a year be enough?

Taking these points into consideration, it makes perfect sense that everybody who works should be saving towards their retirement. Indeed,the government have issued a Roadmap for Pensions 2018 to 2023 where they are looking to make pension savings mandatory in the next 4 to 5 years.

With the introduction of the Construction SEO in October 2017 and the Mechanical SEO in March 2018, the construction sector have taken the lead in providing pension cover for their workers covered by these SEOs but let’s not forget about all the other workers in the construction sector who may not come under the cover of the SEOs. 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 (CWPS) or we can design bespoke pension arrangements for individual employers and members through the Construction Executive Retirement Savings (CERS). For self-employed individuals in the construction sector without pension cover we can also provide cover through the Construction Industry Retirement Trust (CIRT). As the pension provider of choice for the construction sector CPAS knows your industry, so don’t hesitate to call us today and we can get you started!

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

The Benefits of Reading Your Benefit Statement

If you have a pension plan do you read and understand your annual benefit statement? If you don’t here’s some free advice!

In Milestone Advisory, I spend the majority of my time with clients who are approaching retirement or who have already reached this particular milestone.  This part of the financial lifecycle is about taking stock of what you have already accumulated in pension funds and how to maximise its benefits into the future.

Often, it is not until this point that people look for advice around their retirement planning.

I met a couple recently who were decidedly different. They “hadn’t a clue” about pensions, but they had both recently turned 50 and felt they needed some help. While both had accumulated pension funds over the course of their working lives, they did not know what these funds meant for their financial future.

At the end of this particular meeting, I felt that the information I provided and explained was the sort of information everyone needs:  So, here it is – for free.

Both of my clients, having been in pension schemes since their early 30’s felt “that box was ticked”.  This might once have been true; if you joined a company in your early 20’s and stayed there until your 65th birthday with a pension promise of 2/3rds your final salary.  However, defined benefit pensions, where your income in retirement was defined at the outset are no longer the standard type of pension.  Nor is staying with one employer for life.  Now, the vast majority of all pensions are defined contribution i.e. the only thing defined is the pension contribution being invested.

Annual benefit statement 

In this case, you will need to understand what the contributions will translate to in income terms when you retire.  This is where your annual benefit statement comes in.  Each year, your provider will send you such a statement, outlining the contributions that have been paid in along with the current value of your fund.  It will also lay out a set of figures that show you the value of your income in retirement based on these contributions.

It is only when you read and understand this that you can decide if the “pension box” is ticked.  It may be that you are on target for a financially comfortable retirement or you might be surprised to learn that there is a gap between what you will need compared to what you have.

A pension scheme is simply a tax efficient long-term savings plan, but knowing what the outcome will be at retirement is vital.  It is the key to ensuring you have time to enhance your savings should you require.

It is crucial that you take some time to read your defined contribution (DC) benefit statement each year.  Although the layout varies between providers, legislation dictates that all providers include the same information.  This includes your personal information, salary details, your pension contribution level and a statement showing contributions remitted to the scheme in the year since your last statement.  You should take a look over this information to ensure it is correct.

The key area is what is known as a statement of reasonable projection.  This is where you will see the details of your projected benefits at normal retirement age, based on a set of certain assumptions.

While this is not a cast iron guarantee of what will be available to you at retirement, it is the best estimate of what your future fund value and pension will be and the only way you can establish if your contributions into your pension will provide you with meaningful income in retirement.

Time to review

Back to my new clients, a couple in their 50’s, with a file full of unread benefit statements.  We looked at each of their most recent statements.  Both were happy with their fund values, surprised they had saved so much over the years.  Both equally surprised by how those fund values translated into income in retirement.  Taking into account the fact that their mortgage would be paid off by the time they retire and that they would both be entitled to the contributory state pension when they are 68 they still saw a potential shortfall in their desired income.  Finding out now at age 50 gives them close to 20 years to address this.  Rather than at 65 or 68 when they go to collect.

For further information please contact Susan O’Mara at: susan@milestoneadvisory.ie or phone: 01-4068020

Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.

Interested in Reducing Your Tax Bill?

Making contributions to a pension plan could be the answer to reducing your tax bill.

Did you know that you can make a contribution to a pension plan before the 31st October each year and claim tax relief for the previous year?

October 31st (or 12th November 2019 if you use the Revenue Online Services (ROS) to pay your tax bill) is the final date on which you can claim tax relief on backdated pension contributions, in other words, this is the last chance to get some money back from the tax man for 2018!

If you are a PAYE employee and you pay a lump sum Additional Voluntary Contribution (AVC) by cheque/Direct Debit and claim tax relief on this AVC by 31st October you can get tax relief in respect of the previous calendar year.

For example, if you pay a lump sum AVC by 31st October 2019 you may get tax relief in respect of any unused tax relief for 2018 providing you claim this relief from the Revenue by the October 31st 2019.

Example

Additional Voluntary Contribution paid 25 October 2019          €2,000

Reduction in 2018 tax bill (40% tax payer):                              €   800

Actual cost to you of additional €2,000 into your pension:       €1,200

Self-employed people can also claim back some tax:  Let’s say you have a bill of €10,000 for 2018 and preliminary tax of €10,000 for 2019 to pay by 31st October 2019. You could pay Revenue the €20,000 and this job is done for another year or you could make a payment of €5,000 to your pension. This will have the effect of reducing last year’s tax bill by 40% of that €5,000 (i.e. €2000).  As preliminary tax for 2019 is 100% of last year’s bill, you also reduce the preliminary tax by the same amount (i.e. €2,000).

So, you could pay Revenue €20,000 or you could put €5,000 in your pension and pay Revenue €16,000 (i.e. €20,000 – €2,000 – €2,000). Your total spend is only €1,000 more but for that extra €1,000, you pay Revenue the amount due and also have €5,000 in your pension fund – it’s a win win situation!

The following table shows the percentage of your income that you can get tax relief on when contributing to a pension plan, depending on your age and subject to a current maximum annual earnings amount of €115,000p.a.

Remember Saving for your retirement is still incredibly tax efficient.

As well as tax relief, the funds in which your contributions are invested currently benefit from tax-free growth, unlike most saving methods which may be liable for DIRT Tax or Capital Gains Tax. This means pension funds benefit from being able to reinvest the non-taxed returns to generate higher future returns and should build up quicker than a fund that has to pay tax on its investment returns.

Also, when you retire you can take part of your pension fund as a tax-free lump sum. The amount you can take depends on the type of pension plan you have in place. It is important to remember that your regular pension income or Approved Retirement Fund ARF may be subject to tax.

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

Why Diversify?

Famed economist and Nobel Prize winner Harry Markowitz called diversification “the only free lunch in finance.” The thought is that by diversifying, an investor gets the benefit of reduced risk while sacrificing little in expected returns over the long run. Diversification is a technique that reduces risk by allocating investments in various different asset classes. Diversified portfolios should (in theory) provide a ‘smoother’ return without the large highs and lows i.e. volatility, associated with equities. It aims to maximise returns by investing in different assets that would each react differently to the same event. Although it does not guarantee against loss, diversification is the most important component of reaching long-term financial goals while minimising risk. Remember, however, that no matter how diversified your fund, risk can never be eliminated completely.

The rise in Alternative Assets

For many years pension funds have diversified portfolios by holding equities and bonds. For the most part, these two types of investments behave differently, for example; bonds traditionally offer some protection when there is an equity sell-off. However within the last decade pension funds can now access a new asset class, alternative assets as another tool for driving portfolio returns and increasing diversification.

Alternative investment is a term for any investment that does not fall into the traditional equity or bond category. It includes relatively easy to understand assets such as commodities (gold, oil, aluminium etc.) and real assets, such as property, forestry and infrastructure. It also covers more complex unconventional strategies such as hedge funds (or absolute return funds) and private equity funds.  The main reason to invest in alternative assets is diversification i.e. to seek an alternative source of return, ideally a source of return that has a low correlation with the return from equities.

In CERS we have increased our allocation to alternative assets over the last number of years. Members have exposure to alternative assets by investing in the Default strategy.  The CERS Multi Asset Fund is a highly diversified balanced fund and members can also invest directly in the CERS Alternative Asset Fund.

John Geraghty, Pension Consultant, Construction Executive Retirement Services (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

This article provides a summary and is for information purposes only. It does not constitute advice or a recommendation and it does not take into account your knowledge, experience, investment objectives or financial situation. You should always consider taking independent financial advice when reviewing you investment choices

Three Reasons to Start Reducing Your 2018 Tax Bill Right Now!

If you are self-employed, you will more than likely be relieved that the tax deadline has come and gone again. Accountants have been paid, all expenses have been gathered and many of you have made pension contributions to reduce your tax liabilities. Everyone has now hopefully closed off their 2017 tax liabilities and the self-employed have made preliminary payments for 2018. If you are an employee in a pension scheme, your chance to make a backdated Additional Voluntary Contribution (AVC) for 2017 has also passed. 

The one thing you can be certain about is that the tax/pension deadline will appear again in 2019, and you will face the same challenges of paying your tax bill and looking for ways to reduce it. Making lump sum pension contributions is a great way of reducing your tax bill, but it also can be a significant drain on your cash flow. Furthermore, as an employee, you may also be leaving it to the last minute to make an AVC.

There is a better way…

Rather than face that cashflow drain trying to come up with a lump sum pension contribution, it makes far more sense to spread the pension contribution throughout the year. Starting now… right now.

Here are three good reasons why it makes a lot of sense to make regular, smaller pension contributions throughout the year rather than one big payment at year end.

Easier on cashflow
Everything is easier when we save for it. Whether you are putting a few euro aside planning for Christmas expenses, saving up for your summer holiday or indeed making a big purchase such as a new car or home improvements, saving for these always makes life easier in the end. The exact same principle applies to your pension.

Making a regular contribution amount every month (for example say €1,000 per month) is far easier than coming up with €12,000 at the end of the year, particularly as you may also have a tax bill to pay then! After a while of paying a regular amount out each month, you simply begin to notice it less and less as it becomes like another regular outlay. As a result of more money going out each month (but remember it’s going to you!), you are also much less likely to simply waste any surplus cash left over each month.

Finally, the good news too is that if you hit a blip with your cashflow, you can always take a break for a month or two from your pension contribution.

You’re paying yourself first
When you leave your pension contribution to year end, the amount tends to be driven by available funds at that point. All of your other expenses are paid at this stage and your tax bill has been looked after. Your future financial happiness that is achieved by your pension contribution is last in line – it is decided by what’s left over!

Starting today to make that regular pension contribution puts you at the top of the queue. This is known as automatic saving as it simply happens each month, rather than you having to actively do something each month. You’re the first person looked after, and not the last. Money goes into your pension fund each month, increasing your own future financial firepower.

Maximise investment potential
There are advantages to making regular or monthly pension contributions. The first is you will enhance the value of compound interest. We already know that compound Interest is beneficial, due the exponential value of interest on interest.

If we go back to the earlier example of €1,000 per month Vs €12,000 at the end of the year – consider this – for the first 6 months anyway, there may have been interest or growth on each €1,000 invested, adding greater compounding value than to the €12,000 in a lump sum.

This also works another way however. We know that when investing in the markets there are fluctuations in value up and down over the course of the year. Regular contributions may invest in both of these scenarios and consequently purchase more shares or units in the year (increasing value) than a once off lump sum.

Today is the time to act! Set up that regular pension plan and look after your most important financial challenge – your future happiness. Whether you are self-employed or an employee looking to boost your retirement funds, CPAS has a solution for you.

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

Benefit Packages Can Play a Crucial Role in Attracting and Retaining Staff

In her latest article, Susan O’Mara of Milestone Advisory highlights the importance of having a benefits package in place can have in retaining key staff or attracting new staff.

Susan writes, the “2018 National Skills Bulletin”, published by SOLAS, makes for interesting reading if you are running a company; you need to know what is in store for the labour market in your sector.

If you are a parent with kids pondering their choices for the CAO – it is also worth a read. It may give you an idea what of skills will be in demand when they are ready to enter the workforce in 2023 – 2025.

It may not be news to you that there are skills and labour shortages in the construction sector and that those shortages are for both professionals such as project managers, quantity surveyors and for trades people and general operatives. Considering this, it becomes all the more important that you have a competitive reward package in place in order to retain the key staff and attract high quality new staff.

There are thousands of scholarly articles online on the topic of how to attract and retain staff. They cover the hiring process, the efficacy of the people managers, training and overall work environment.

Finally, there is salary, which is the focus of this piece. While a competitive salary is important, it is not always the most important deciding factor for employees – so much as the overall benefits package is. The overall benefits package may include membership of a pension scheme, life assurance, health insurance and income protection. It may offer all or a combination of all, depending on the employees requirements.

What is included in a benefits package?

Along with salary, this usually includes an occupational pension scheme, into which an employer makes a pension contribution for their employee and most often, so too does the employee. Schemes can be designed to provide similar contributions for all staff, or, to reward experienced staff. One scheme does not necessarily have to have the same rates for all employees.

More often than not, there will be life insurance, also known as death benefit or death in service. This pays out a lump sum to the dependants of an employee on their death while an employee of the company. Once again, there are varying levels of cover and you can arrange different levels of cover, for different categories of staff.

Another cover that employees seek is health insurance, with new types of corporate cover popping up all the time. These provide tradition health insurance with added employee assistance programmes and employee wellness programmes.

My personal favourite benefit is income protection. Should you find yourself unable to work due to illness or injury during your career, who would pay your bills? Not your medical bills, but your ordinary living expenses? Your mortgage, utility, and such like. Income protection provides real peace of mind for employees around this. Furthermore, it is about 60% cheaper for an employer to provide this benefit under an employer sponsored arrangement than for an employee to buy an individual policy directly from and insurance company.

A fit Fit-for-Purpose Package

Having a benefits package in place is a good starting point, but is it fit for purpose? Does it suit the demographic of your workforce? A single 25 year old might be less interested in life assurance than a 40 year old with a young family. Neither the 25 year old nor the 40 year old may be enthused by the pension scheme that you are offering if you are not enthusiastic about the fact that you are offering it. You may need to highlight the value in the benefits you are offering, on a regular basis, to ensure that your staff fully understand and appreciate what they have and what it means to them and their future.

For further information please contact Susan O’Mara at: susan@milestoneadvisory.ie or phone: 01-4068020

Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland

What is Your Financial Plan for 2019?

In her latest article, Susan O’Mara of Milestone Advisory focuses on the need for us all to think about planning for the next 20 years rather than just on the year ahead when it comes to planning for our retirement. 

Susan writes – at this time each year, I would usually write nine things to do better in 2019 or alternatively, what is the outlook for 2019 or words to that effect!

When it comes to retirement however, the outlook has not changed in decades. When it comes to retirement in Ireland, the outlook is bleak. People are either uncertain about how they will fund retirement or, worse, not considering retirement at all. Not enough people are saving for retirement, and for those who are, there is a question regarding adequacy of their savings. It is with this in mind that this outlook focuses on the next 20 years, rather than next year.

Irish Life carried out some research recently, which highlights the change in demographics and how it affects pensions. They found that in the last 5 years there had been a significant increase in the population of over 65’s. This figure was 100,000* compared to an increase of only 44,000 for 15-64 years olds. I have been writing on the topic of the impact of an ageing population for some time now, however, seeing these figures really brings it home. If this is the age category growing the fastest, this is where the money needs to be, and for many, it is not.

This trend is expected to continue over the next 20 years, with a 70% increase in these figures. This would mean the over 65’s will be over 1.1 million in numbers. If you have read my articles before, you may already have read about the pressures this will have on the State Pension and general taxation and these are the hot topic issues, but there are other downsides.

If you are an employer for example, you may find it increasingly difficult to retire people at 65 or even up to 68. In 10 years, employees will not be entitled to their State Pension until they are 68. If at 68, that is all they have (currently just shy of €13,000 per annum) they may not be able to afford to retire. Employment law has made it increasingly difficult to discriminate on the grounds of age, and rightly so, however, employee attrition via retirement is natural and beneficial to both the company and the workforce coming up behind them. Without this, employers may find themselves in a situation where they have an ageing workforce, with no intention of retiring and therefore are not in a position to bring in new innovative staff. If employees have meaningful pension funds, retiring becomes an easier and more obvious choice.

Most of us already understand this on a basic level, but it is only when you personalise it does it fully sink in. Looking at it this way may help it sink in. Whether it is your workforce or your own personal retirement plan – it is worth taking your head out of the sand now.

Firstly, the government have finally decided to get tough with us on this and are currently engaged in the consultation process of a nationwide mandatory pension scheme, which should come into force in 2022. This is a good start and will be beneficial to many people not already covered by their employers for pension, however, this will take a number of years to bed down and for the contributions to add up and become meaningful. In 1992, Australia introduced a mandatory scheme, which now, 25 years later, has reversed the fortune of a vast number of people. However, while coverage has increased, the contribution rate is still being gradually increased and savers there know that they must make meaningful contributions into the scheme themselves.

Over the next 20 years, we should see a new landscape when it comes to pension savings and the first step of this is engagement from both employers and employees with regard to their part to play.

If you are still not convinced that the 20-year outlook could have a huge benefit if we engage with pension savings, consider this; a 30 year old earning €40K per annum making annual 10% pension contribution can build a fund at 65 of €392,872, whereas, if that individual puts off saving until they turn 50 and are saving 10% per annum of a salary of €65,000 will only save a fund at retirement of €149,693*.

Over the next 20 years, we can change our fate as a country and as individuals when it comes to our retirement. It’s time to get started – make it your 2019 resolution.

*Irish Life & CSO & Eurostat.

**Source – CERS Online Pension calculator

For further information please contact Susan O’Mara at: susan@milestoneadvisory.ie or phone: 01-4068020

Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.

The Construction Sector is Ahead of the Game

Many of you may already be familiar with the Sectoral Employment Order (SEO) for the construction industry, this was the first SEO announced in October 2017 and written into law by the Minister of State at the Department of Business, Enterprise and Innovation. This SEO outlined rates of pay for specified workers in the construction industry, as well as pension, sick pay and death in service rates for those workers. This first SEO for the construction industry has now been followed by an SEO for the Mechanical Engineering Building Services Contracting Sector, which came into effect on 6th March 2018 and also outlines rates of pay for plumbers and pipefitters as well as pension, sick pay and death in service for these workers.

This is a very significant development and puts the construction industry ahead of the curve in relation to mandatory pensions. It places the construction industry in a leadership role in the pension space, as it is the first industry to be legally obliged to provide workers with a pension.

Until the introduction of the SEOs, construction industry employers were not legally obliged to provide their workers with a pension. The SEO changes all that; it is now compulsory for employers in the Construction and Mechanical Engineering Building Services Contracting Sectors to provide pension, sick pay and death in service provision for specified workers between age 18 and 65.

Mandatory Pensions are Coming for All

As already mentioned, the construction sector is leading the way, it is the first industry to be legally obliged to provide workers with a pension. The Government recently published their Roadmap for Pension Reform 2018-2023, which outlines a series of wide ranging reform proposals, one of which is a new automatic enrolment into a retirement saving scheme for employees in the private sector who are not currently saving for their retirement. Automatic enrolment is expected to be introduced from 2022. There will be three parties paying into the scheme for each worker – their employer, the employee and the State (via tax relief or other such mechanism). Workers will have the choice to opt-out, but if they did they could lose all of the contributions, and not just their own. The starting point though will be that everyone is included in a retirement savings scheme.

CPAS – the provider of choice for the construction sector

CIF Pension Administration Services DAC (CPAS) provides specialist and professional pension administration services to pension schemes that were developed solely for the construction sector.

The Construction Workers Pension Scheme (CWPS) is one of the largest private sector pension schemes in Ireland with over 25,000 members and supported by over 2,000 employers. CWPS provides pension, death in service and sick pay benefits for workers in the construction and related industries and is open to office staff as well as manual workers. CWPS is the scheme of choice for the construction industry and it satisfies the conditions of the new SEOs in relation to pensions, sick pay and death in service benefit.

CWPS exactly meets the requirements under the SEO and it has experienced significant growth in recent months as employers seek to meet their obligations and to provide the valuable benefits for their employees. For further information on complying with the new SEO legislation for pensions, you can see their website www.cwps.ie or you can contact a member of the CWPS team on 01 407 1444.

The Construction Executive Retirement Scheme (CERS) is an umbrella scheme providing pension and protection benefits to individual employers in the construction and related industries. It is particularly suited to individuals seeking higher benefits and greater flexibility than those available under CWPS. Through its flexible structure, CERS can meet the particular needs of each employer by providing bespoke and varying pension solutions for employees.

The Construction Industry Retirement Trust (CIRT) provides a flexible pension arrangement to meet the retirement planning needs of self-employed individuals and employees with no pension provision in place, who are employed within the construction and related industries.

Through our subsidiary, Milestone Advisory, we offer independent financial. Milestone Advisory offers impartial financial advice with an approach based on achieving desired outcomes rather than “product push”. Their aim is to build long-term, valued relationships with clients, helping them to achieve their financial objectives.

*Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.

If you are unsure how best to proceed in the world of pensions, our team at CPAS will be delighted to guide you. For further information please contact us at (01) 407 1400 or by email at info@cpas.ie.

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

The Need for Mandatory Pensions in Ireland

If you follow this regular advice column you’ll note that there is a heavy bias towards retirement planning. As a Financial Advisor for the construction sector, I meet many members of the sector’s two big schemes, CERS and the Construction Workers Pension Scheme.

My concern is that private pension coverage in Ireland is low, with only a third of private sector workers saving for retirement. This means that two thirds of the population will be solely reliant on the state to provide for their income in retirement.

Let’s dig down deeper!

We pay PRSI contributions and the state promises to pay us a pension to replace our income when we are no longer working. From March 2018, the full contributory state pension will be €12,651.60 per annum. However, currently, the state doesn’t set aside money meet this promise. They pay it from the exchequer (tax take) in the year it falls due.

What’s wrong with this?

Well, currently there are about 5 people working and paying tax for every person in receipt of the state pension – but a shift in the demographic means that by 2050 there could be only 2 people working for every retired person. This puts significant pressure on the state’s finances. Of course we’ve known this for some time and an OECD report in 2012 highlighted this and recommended the implementation of a later state pension age and the establishment of a mandatory pension scheme for all workers.

The state pension age was indeed pushed out. The qualifying age is currently 66; it will increase to 67 years in 2021 and to 68 years in 2028. It is widely discussed that a state pension age of 70 is likely to be introduced at some point also.

However, while there has been a lot of noise about a mandatory pension scheme nothing concrete has materialised so far. Many of our European neighbours are up and running with this and are seeing significant increase in their private pension coverage.

What is a mandatory pension scheme and how could it help?

A mandatory pension scheme would mean that all employers, big and small, would have to contribute a specific amount or percentage of salary for all workers. It could most likely be quasi or soft mandatory, meaning people would be automatically enrolled in a scheme but could opt out if they wished. This would have the effect of increasing private pension coverage in this country.

In 2012, the OECD reported that countries with mandatory or quasi mandatory workplace pensions has 70%+ coverage and that same year the UK rolled out its own auto enrolment scheme. Although this scheme started with only the largest employers it will be mandatory for employees in 2018. Early evidence sees only approx. 9% of people opting out. While this number may rise somewhat in 2018 – it still represents a huge increase in providing pension coverage.

The Sectoral Employment Order (SEO), recently signed into law, provides for mandatory pensions for specified construction workers. I commend the industry for this move – it ensures that an entire sector of workers are covered and the construction industry is a couple of steps ahead of the state when it comes a mandatory pension.

Any other issues?

As we know well, there is a housing crisis in Ireland. More and more of the population are in rental accommodation, paying high levels of rent and may never afford to buy homes. When this group of people reach state pension age, how will they pay rent? The state pension levels as they are, (and are likely to remain) will not cover the cost of rent. This will put further pressure on the state finances in future years.

It is a matter of some urgency that these issues are addressed so that this ticking time bomb is diffused.

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

Are you Covered?

With effect from December 2017, self -employed people in Ireland have finally became entitled to long- term sick pay. This is great news for this cohort of people, who typically have been treated unfairly in Ireland, especially when you consider that OECD figures show close to 20% of the Irish workforce are self- employed. Tradespeople in our Industry would make up a significant portion of this.

The invalidity pension is a weekly rate of €198.50, with possible increases for an adult dependant and child dependants is a payment for people who cannot work because of a long-term illness or disability, and is not means tested.

Now for the gloom…

Did you know that during your working life, being diagnosed with a serious illness is a greater risk to you than death? The Life Assurance industry claims experience tells us that you are likelier to suffer from Cancer, a Heart Attack or a Stroke before you retire than you are to die before age 65. While we welcome the revised eligibility to the invalidity pension, it will only bring in just over €10K per annum. Can you (& your family) live on this?

While many of us have some form of Life Cover in place, through mortgage protection & other policies, most are unfortunately lacking in financial protection in the event of a serious illness. There are protection options available to you. Making ends meet should be the least of your concerns if you cannot work due to illness.

What should you do?

A new year is a good time to review your situation and put a financial plan in place. When you are self-employed, you do not have the luxury of protection policies provided by your employer and so it is up to you to make sure you are covered.

Planning helps to maximise the efficiency of your money and to do that it is important to know where you are. Many of us have some idea of our income vs our outgoings. We know our income, and our fixed expenditure such as the mortgage. However, achieving a more realistic picture requires a little more effort. You will need to look at outgoings that only happen on a quarterly or less frequent basis. All banks have online facilities that provide statements going back a year or more, and the frequency with which we use Visa means that there is much of the data readily available to look back at recent habits. Furthermore, with PSD2 now in effect from January 2018, there will be floods of fintech apps that will be able do most of this work for you.

Where you are at in your financial life cycle will help clarify what level & type of protection you need. If you have no family and no debt, you may only require income protection – to replace an income if you were unable to work due to illness or injury. On the other hand, if you have a family and mortgage, you are likely to need a combination of Life Cover, Income Protection and Serious Illness cover. Balance is key and sitting down with a financial adviser will ensure you have the best cover for you.

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

Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.

  • Construction Workers Pension Scheme