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 and Engineering

In this edition of Irish Building Magazine, Susan from CPAS looks at IORP II and the impact on the pension industry in Ireland.

Much talk about pensions in the media of late has been focussed on the State Pension Age and whether it will increase past 66 or not. This was an important topic at the last election and is back on the agenda again. It appears that political parties do not expect to be re-elected if the State Pension Age is increased to 68 as previously legislated for.

Why increase the State Pension Age?

In simple terms, an ageing population, and a future landscape where more people are in receipt of the State Pension than are actively working and paying tax, makes the current level (€13,171.60 p.a.) unsustainable. Pushing the State Pension Age out to 68 was a way to decrease the burden on the Exchequer. The ramifications for employers when it comes to the State Pension Age, particularly if they don’t have a pension scheme in place, will result in employees being unable to retire before they can access the State Pension even if it’s in the best interests of the employee to do so.

IORP II deadlines

There has been less media coverage of IORP II, which could have a more significant impact on you, your business or your pension arrangement. A European directive, this was transposed into law in Ireland in 2021, under which many of the deadlines for changes have already passed or are looming.

If you are an employer already running a standalone scheme, either acting as a Trustee or paying a small trustee company to provide such services, the IORP II legislation will affect you.

One of the key areas of the IORP II legislation is around effective systems of governance. Trustees of schemes will need to implement compliant policies around risk management, internal audits, any outsourced activities and communications. This will result in a significant compliance burden and increased costs for small or stand alone schemes.

Why the media attention now?

This European directive is in the headlines this week as it transpires that the effect of the IORPII legislation has had an impact which was not previously anticipated.

With effect from 1 July 2022, the Pensions Authority advised that any “One Member Arrangement” (OMA), set up on or after 22 April 2021 must meet the full requirements of the Pensions Act, 1990, as amended (the Act). This includes the new requirements of the IORP II Directive, by 1 July 2022. The resulting compliance burdens and costs effectively could render these one person arrangements unavailable in the Irish market.

Auto enrolment

According to recent CSO figures, private pension coverage in Ireland is low. This means that many will be solely reliant on the State to provide for their income in retirement. As noted above – there are some major challenges ahead if conditions continue as they stand currently.

In 2012 the OECD reported that countries with mandatory or quasi mandatory workplace pensions have 70%+ coverage. Ireland has started on the road towards mandatory pension coverage, but there is still a long way to go. This scheme hopes to cover employed individuals who are not covered for any pension. This scheme would be funded by the individual, their employer and the State. It is slated to commence in 2024 – but that is already a later date than previously planned.

So has anything remained the same?

The pensions landscape has changed dramatically, some challenges do not – the struggle to attract and retain skilled workers for example. The core solution is to offer key talent more than just an attractive monthly salary, but to offer a meaningful pension and benefits package that employees are engaged with.

CPAS – the pension provider of choice for the construction sector

Now is the time for the construction sector to make a difference to the future of all their employees through pension savings and cover. Our team of consultants is available for no obligation, virtual calls to help you navigate these options.

For more information, please get in touch with the team (info@cpas.ie).

 

Last Saturday, CERS was delighted to support “Construction’s Big Night Out” at the Irish Construction Excellence Awards night in the Convention Center in Dublin. Hosted by Irish Building Magazine, this was the first in-person (celebration) event for many of us in the sector.

A big congratulations to Jacobs Engineering and their client, Edwards Lifesciences, who took home the prize in the “Industrial Over €15m” category (proudly sponsored by CERS and presented by John Geraghty). This award recognises the amazing work of Jacobs Engineering on the completion of the Edwards Lifesciences Greenfield manufacturing facility in Limerick.

To view all images from the night, please visit the ICE awards website.

Many thanks to the ICE Awards team who worked tirelessly, for months behind the scenes. However an extra special thank you must go to the heroes of the night, Alan Worrall and Ollie McNally.  An individual had a serious cardiac episode on the night. Two senior members of Walls HSE team were attending the event and in close proximity to the incident. They intervened immediately, cordoning off the area, conducting CPR and organising the emergency services. Thankfully, the individual is recovering in hospital and a representative of the Dublin Fire Brigade Ambulance Service told the Walls team that the prompt, professional and skilled actions of the Walls team were crucial to his survival.  Walls mentioned that this “incident once again highlights how crucial it is to ensure that as many people as possible are First Aid Trained and in particular have First Responder Training, it literally can save a life at the most unexpected moment.”

(Photo L-R: John Geraghty, Diarmuid Collins (Edwards LifeSciences), Eoin Hayes, Niamh Barcoe, Shane O’Sullivan (Jacobs) and Deirdre O’Kane)

 

 

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

In its latest instalment for Irish building magazine CPAS looks at the complex area of Politics, Pensions and Construction, and as the pension provider for the construction sector offers advice and solutions to assist in getting pension savings and cover in place. Read the full article on the Irish Building Magazine website.

Pensions and taxes are on the bottom of the average persons ‘life admin’ list. We don’t know that for a fact, but ask anyone and they will confirm that other than Budget 2022 announcements, most of us avoid the two topics.

However, what if there was a benefit to discussing pensions and taxes once a year? (The benefits are numerous at any time of year, but particularly in October).

How are pensions, tax and October related? The answer is straightforward:

Making contributions to a pension plan could be the answer to reducing your tax bill. Making a contribution to a pension plan before the 31st October each year allows you to claim tax relief for the previous year.

Important Deadlines

October 31st (or 17th November 2021 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 2020. (Cheques must be received by October 29th)

If you are a PAYE employee and you save 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.

Example

Additional Voluntary Contribution paid 25 October 2021:       €2,000

Reduction in 2020 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 2020 and preliminary tax of €10,000 for 2021 to pay by 31st October 2021. 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 2020 is 100% of last year’s bill, you also reduce the preliminary tax by the same amount (i.e. €2,000).

Where would you like to see your money going?

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 –you are ahead now and setting yourself up for retirement!

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.

Saving for your retirement is 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.

In addition, 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.

To learn more about your pension options, get in touch with us today. Whether you are a company director, self-employed or PAYE worker, we can help.

Budget 2022 contained few surprises. There was a lot of talk in the run up to the 12th of October and the Government gave clear signals in advance. The Government is confident that there is something for everyone in the audience, with many pundits likening it to the Late Late Show giveaway.

It has now been announced that individuals in receipt of the State Pension will receive a €5 weekly increase. This will see pensioners receive a weekly payment of €253.30 from January 2022*, instead of the lower, €248.30 per week which they currently receive. Around a third of all workers rely solely on the State pension for their retirement income.

While generous, consider how much your weekly income will drop if you are reliant on the State Pension. Can you afford to reduce your income to that extent? You might have paid off your home and your current dependants may no longer need your financial support – but is €253.30 enough for you to live on for the rest of your life? With a retirement age of 66 currently, people can expect to live (and draw down a State pension), for close to 20 years in retirement, half as long as their full working lives.

Are you looking to work until you are 68 years old?

There was little talk of the pension age in the budget this week, but it is worth a mention. While the Commission on Pensions recommended the State Pension age to remain at 66 until 2028, the 2011 Pension Act put Ireland on course to have the highest pension age in the OECD in 2028, despite the youth of our nation*. Under new recommendations discussed in Cabinet recently, the State reviewed the possibility of increasing the pension age by three months every year from 2028. Under these recommendations, the pension age would reach 67 in 2031 and 68 from 2039. It might seem like a lifetime away, but as a professional working in the construction or related industry, can you imagine working until the age of 68?

Consider this – those looking to retire in 2051 are people in their mid-thirties now and will be looking to retire around then.

If you are not sure whether the State Pension provides a sustainable life for you and your family – the best thing to do is reach out and get proper guidance. While the best time to start a pension has come and gone, the second best time is now.

The best time to start planning for your future…

CPAS administers a number of pension schemes, ensuring there is a pension scheme that suit the needs of your business – whether you are self employed or running a large company. Contact us to get started. There are no obligations, no complicated jargon – just clear facts to help you get started.

 

 

*Source

**Source

Skilled staff shortages have been widely publicised by the CIF and industry leaders of late. This ongoing shortage appears to be affecting every company – large and small – across the construction and related sectors. In this edition of Civil and Construction, we look ways to stem the loss of skilled workers with a fit-for-purpose benefits package. 

It is particularly acute in the areas of skilled workers. Construction companies are in competition with one another to attract a limited pool of skilled staff. A competitive salary and career prospects play a part in staff attraction and retention, but it is not always the deciding factor for employees. A broader benefits package can sway a prospective employee, which might include health, life and sickness cover and pension provision. These individuals are looking towards their future and want to ensure they are covered for all eventualities. The desire for a pension contribution along with other benefits may appear during the interview process, in addition to the usual salary negotiations.

Why are pensions such a hot topic?

The pensions issue has been raised as an impending problem for decades. More recently, in early 2020, before the Covid-19 pandemic changed our lives beyond anything we could have ever imagined (or feared) and Britain left the EU, Ireland went to the polls to elect a government. While the most hotly contested topics were health and housing, political parties (and media pundits) were surprised to learn that it was in fact pensions that came in as number three on the list of concerns for voters, ahead of Brexit. While we can’t say for certain what was on the minds of those who went to the polls that day, it is interesting to note that 62% of those who voted were between the ages of 18 – 24. Perhaps it was a higher priority for the more mature voter, but pensions were certainly on the voter agenda.

There is a real possibility we will not be able to rely on the State Pension in the future due to an aging population among other elements. This is where the ‘Second Pillar’ or occupational pension is vital and can be used as a benefit to attract skilled employees at a time when these are a scare resource. As an employer, you can help your employees prepare for retirement and develop this as an incentive to attract and retain employees.

What is included in a benefits package?

Along with salary, an occupational pension scheme can be provided as an option, into which an employer and employee makes a pension contribution. 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 and can be customised to the needs of the company. 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.

It might also be worth noting that many employees now seek health insurance. There are new types of corporate cover popping up all the time. These provide tradition health insurance blended with employee assistance programmes and employee wellness programmes. There is another benefit often worthy of consideration referred to as income protection. This is particularly important should you find yourself unable to work due to illness or injury during your career. This is not in place to cover your medical bills (that’s for your health insurance),but your ordinary living expenses. Your mortgage, utility, and other important payments. Income protection provides real peace of mind for employees. 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-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. However, the idea of an income protection policy might peak their interest. Simply put, income protection is a policy insuring a portion of your income, so you are covered in the event of a loss of earnings due to illness or injury. It can pay out until you recover or you retire.

Once an employee joins your company, it can be a challenge to highlight the benefits of pension and cover, but it is important to remind employee about excellent benefits package they receive through their employment with your company. This is an educational piece that CPAS is more than capable of assisting with for onsite and virtual employees.

When it comes to cover and pensions, our team of consultants and financial advisers are on hand to help. We can help you and your team navigate through the multiple options available and highlight the existing benefits to saving for retirement – such as tax breaks. Tax breaks are available to employees making pension contributions (e.g. Additional Voluntary Contributions), but they are also available for companies. Employer contributions receive corporation tax relief as they are offset against profits before tax. Furthermore, the costs associated with setting up a pension scheme can be onerous for even the largest of organisations but joining a Master Trust such as CERS and CWPS (administered by CPAS) removes both the high costs and complications.

CPAS – The Pension Provider for the Construction Sector

CPAS is the central point of contact for employers offering pensions, life cover, income protection and other benefits to all those employed in the construction and related sectors, from company directors, office staff, on-site workers and self-employed individuals. Our team of consultants are available for no obligation, virtual calls to help you navigate the benefits outlined above.

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

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 (CWPS, CIRT 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/