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/

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?

CPAS is the scheme administrator for pensions in the construction sector. We work with Members to develop a clear vision for the future and identify achievable goals before working with them to create a plan of action that they can implement today. For help planning your future, contact a member of our team via info [at] cpas.ie

 

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.

Sources:

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

 

We are all aware that there continues to be a shortage of skilled labour in the construction sector and employers are finding it difficult to attract and retain staff.  Employers realise that to try to attract staff they need to be creative and have launched a number of different initiatives.  However, beyond these initiatives, prospective employees will always turn their attention to the benefits on offer when deciding whether to join a company. Read more

We mean two things when we talk about planning for retirement.  The first plan is to set up a pension scheme, either a personal pension or participation in your employer sponsored occupational pension scheme.  Then you will need to regularly contribute, throughout your working life with the aim of accumulating a pot of money, which you can then use to replace your salary when you retire. Read more

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.

 

For more information please contact CPAS at 01 407 1400 or email info@cpas.ie