Category: Insights

As we’re approaching the end of the year, there’s no better time to take a fresh look at your pension contributions. A little bit of planning now can go a long way in making sure you’re set up for a comfortable retirement. One way to give your pension a boost is through Additional Voluntary Contributions (AVCs). This piece will cover why AVCs can make a big difference in your retirement fund.

Understanding Pension Contributions

Working in construction isn’t for the faint-hearted. It’s a fast-paced, demanding sector, and planning for the future can sometimes take a back seat. But having a solid pension plan in place can be a huge weight off your shoulders. If your employer offers an occupational pension scheme, you’re likely contributing to your pension throughout the year.

That said, regular contributions alone might not be enough to guarantee the retirement lifestyle you’re hoping for. This is where AVCs become really beneficial. They’re a simple way to bump up your pension pot and give yourself some extra peace of mind.

 Why Additional Pension Contributions Matter

Here are a few good reasons to consider making additional contributions to your pension:

Tax Savings

One of the main advantages of making AVCs in Ireland is the tax relief available. You can claim tax relief at your marginal rate, which means the government essentially chips in a bit towards your retirement, depending on your income.

Boosting Your Retirement Savings

AVCs offer an easy way to add to your pension. If you’ve had fluctuating income or maybe even received a nice little bonus, putting some of that towards your pension could really pay off later.

Making Up for Lost Time

If you haven’t been contributing consistently, whether due to tight finances or other reasons, these contributions let you catch up a bit.

Compounding Returns

The earlier and more you add to your pension, the more you’ll benefit from compound growth. Those year-end top-ups could make a substantial difference over time.

What’s the Deal with AVCs?

AVCs are just extra contributions you can choose to make on top of your regular pension. AVCs are a great tool for anyone who wants to make their pension work harder for them, especially as we approach the end of the year.

Benefits of AVCs

Flexibility

With AVCs, you get to decide how much you want to contribute and when, which is beneficial if your income varies. Perfect for the construction sector, where things can sometimes be unpredictable.

Tax Relief

Like regular contributions, AVCs qualify for tax relief at your marginal rate. It’s a nice way to lower your taxable income while adding to your pension.

Investment Options

Most pension schemes offer a range of investment choices for AVCs, so you can tailor things to your own risk tolerance and financial goals. With the right choices, you might even see higher returns.

Making the Most of Year-End AVCs

Here are a few ways to make sure you’re getting the most out of those AVCs:

Take Stock of Your Finances

Have a good look at your current financial situation and decide how much you can afford to contribute without stretching yourself too thin.

Get Some Advice

A chat with a financial advisor could be really beneficial. They can help you make sense of the best way to approach AVCs based on your goals and guide you on tax savings.

 Maximise Tax Relief

Remember that there are annual limits on tax-deductible pension contributions, and these vary based on your age and income. Plan your AVCs to make the most of the available tax relief.

 Invest with Care

Choose investment options that suit your risk comfort level and retirement goals. Diversifying your investments can help mitigate risk while potentially increasing returns.

Final Thoughts

Year-end pension contributions, especially through AVCs, are a great way to top up your retirement savings and take advantage of any tax benefits on offer. It’s a smart way to strengthen your pension and enjoy a bit more financial security down the line. As we approach year-end, why not take a bit of time to review your overall pension strategy? It’s one of those things that will pay off in the long run—and remember, retirement planning is a journey, not a one-time thing. A little attention each year can really add up.

Talk to CPAS, or your pension provider, to discuss what works for you, visit https://cpas.ie/avc for more.

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.

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.

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

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).

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, 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:

• EUROSTAT

• **PENSIONS AUTHORITY AND DIVORCE GUIDE

• **PENSIONS AUTHORITY AND DIVORCE CHECKLIST

• WIKIPEDIA 

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

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.

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

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.

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