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.

In the latest edition of Construction Magazine, Susan O’Mara, Business Development Manager in CPAS, reflects on the past year from an investment perspective.

Construction MagazineAs another year comes to an end, many of us reflect on the highs and lows of the last 12 months. Many articles online try to capture the year in a single snapshot – from what we searched for online, the types of content we consumed to the words we used. The summaries invariably uncover some deeper meaning and offer some lessons.

You may read that in 2022 “goblin mode” (arguably two words), is the Oxford English Dictionary’s word of the year. While “permacrisis” is the Collins Dictionary offering. Quiet the concise snapshot indeed.

My word of the year: Inflation

For me, the word of the year for 2022 was inflation. Inflation – defined as a rise in prices, which can be translated as the decline of purchasing power over time. The spiralling increase in the costs of goods and services in 2022 was headline news across much of 2022. Grocery price inflation ending the year in double digits coupled with huge energy prices increases dominated news across much of 2022, due to the ongoing war on the Ukraine.

As increasing interest rates go hand in hand with inflation, “inflation rates” would be the second word on my list (if Oxford can double up on the word count, so can I).

These are not just words; they have a profound effect on our personal finances. Inflation and interest rates affect our personal finances.

A silver lining for some?

However, these higher interest rates are not good news for mortgage holders. (Word to the wise if you have not yet secured a fixed rate and are still on a variable rate; speak to your mortgage provider now). In contrast, higher interest rates may be good news for deposit holders. For many years now, we have seen low and negative interest rates on deposit investments and regular savings. We may now begin to see positive interest payable again. While positive, it is worth bearing in mind that the deposit interest is never as high as the mortgage interest and will likely be below the inflation level. As a result, holding money in a cash deposit still means that the value of your savings could be losing value in real terms (something I previously wrote about for Milestone Advisory).

What about Investing?

Once again, those rising interest rates can also affect stock markets negatively. So far, in 2022 world markets are down nearly 10% year to date (MSCI AC World Net TR 2022 YTD 09.12.22).

Along with rising costs, the predominantly volatile and overall negative performance was a main concern for investors this year. Whether investing your savings or saving for retirement, dealing with negative stock market performance and fund returns can be rather unsettling.

Hold the course

The conventional wisdom at times like these is for the majority of investors to hold the course, stay invested as per the goals and objectives. An investor who had €100K to invest back in 2002 would have €327,365 in their investment today if tracking the MSCI AS World Index.

I have said this before, but it bears repeating, “It’s time in the market and not timing the market”.

Investors who rushed to Cash or other so called “safe haven” assets back in March 2020, (when the market was at its low point during the Covid crisis), would have missed the subsequent recovery. With a long-term investment, such as a pension, if you are not close to retiring, staying invested, even when it seems ill advised, is advised! I previously penned an article on this topic for Milestone Advisory here.

Susan O’Mara is Business Development Manager in CPAS. CPAS helps companies in the construction and related sectors navigate through the ever-changing pension environment. If you would like to discuss your personal or company pension options, please contact our dedicated team on (01) 223 4947 or contact me directly via email (susan@cpas.ie).

In the latest edition of Construction Magazine, John Geraghty examines the impact of both IORP II deadline and Auto Enrolment.

By the time January 1st 2023 rolls around, the Pensions Authority expects all pension schemes to be fully compliant with all IORP II requirements. There are some organisations that have yet to make the important decisions on the future operation of their pension schemes even as the January deadline for compliance with the IORP ll deadline looms.

An Annual Compliance Statement (ACS) must also be prepared by no later than 31 January each year in respect of the preceding year. The ACS must be certified for accuracy and completeness by at least two trustees or, in the case of a corporate trustee, by at least two directors. It is vital, therefore, that employers and trustees consider their options and agree appropriate processes to manage IORP II compliance.

Making a decision

For those employers who have not already done so, they will need to decide urgently what the best solution for their defined contribution scheme is. For those who wish to continue administering their own scheme in its current format, it is possible to do so long as they support the implementation of the IORP II requirements. They must also be mindful of the enhanced levels of governance and compliance along with the additional costs incurred as a sponsoring employer.

Alternatively, for those who do not wish to take on the arduous tasks of self-administering a scheme, employers can consider an alternative pension arrangement, such as a multi-employer arrangement (or a Master Trust), which might be a more appropriate and efficient solution.

Finding a solution

Multi-employer arrangements are a bundled, fully outsourced solution. Everything is administered centrally on behalf of participating employers. The primary benefit therefore is economies of scale, a reduction in costs and delivery of time efficiencies associated with running a defined contribution pension plan, without sacrificing quality or compliance.

Right now, your immediate focus should be firmly on IORP II by 1st January 2023 and preparing and signing your 2022 annual compliance statement by 31st January 2023.

Many employers and trustees will already be working on this, however, if you have any queries or are unsure of what you need to do, please contact us, we would be happy to help.

Waiting for Auto-Enrolment or taking proactive steps?

The government’s proposed auto-enrolment scheme has been described as a ‘once-in-a-generation’ pension policy. As the only OECD country without a mandatory retirement savings system, Ireland is playing “pensions catch-up” with most of the developed world.

From 2024 employees aged 23-60, earning over €20,000, who are not already enrolled in an occupational scheme will be automatically enrolled. They will have to opt-out if they wish to leave. Workers will have their pension savings matched on a one-for-one basis by their employer. The State will also provide a top-up of €1 for every €3 saved by the employee.

There are the proposed contributions provided for by the government:

Years
Employee
Employer
State
Total
1 – 3 1.5% 1.5% 0.5% 3.5%
4 – 6 3% 3% 1% 7%
7 – 9 4.5% 4.5% 1.5% 10.5%
10 + 6% 6% 2% 14%

 

*Employer contributions and the State top-up will be capped at a maximum €80,000 of an employee’s gross salary.

Additional Considerations

Issues have arisen with the initial low level of pension contributions but in addition, individuals will be unable to make Additional Voluntary Contributions (AVCs). Employers who wish to top up the minimum amount will not be able to contribute more than the stipulated maximum.

Under the auto-enrolment system, the State subsidy of 33% of the employee contribution equates to 25% tax relief. By comparison, for Members of an occupational pension scheme, they will receive income tax relief on pension contributions at their marginal tax rate (i.e. 20% or 40%).

In CPAS, we believe, while auto-enrolment will increase the number of people saving for their retirement, the proposed system’s inflexible contribution rate and tax relief make it a less attractive proposition. As a consequence, construction companies may be better suited setting up an occupational pension scheme rather than being auto-enrolled into the State scheme. This is especially attractive to those employers’ who are looking to attract and retain skilled staff.

CPAS – Pension Specialists Serving the Construction Sector

If you are concerned about your IORP II and auto-enrolment obligations, the CPAS team can help you navigate the vast amount of information, explaining how it will impact you, your organisation and employees. Most importantly, we’ll guide you along the way, helping you maximise your investment – whether it is in your staff or your future.

Our team is available for no obligation, virtual calls to help you navigate these options. Get in touch with us via phone (01) 223 4947 or contact John directly (j.geraghty@cpas.ie).

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.

Construction Worker

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.

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

 

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)

 

 

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

CIF International Women's Day 2022

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

Issue 3- Irish Building Magazine - 2021

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.

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 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.

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