In this edition of Irish Building Magazine, we look forward to a New Year, a new decade and what might the future the hold in the pensions’ world.
It doesn’t seem that long ago since we celebrated the arrival of the new century and now we are into the 3rd decade of that century – time marches relentlessly on. As we settle into 2020 maybe now is a good time to reflect on the impact that time has had on our lives and to consider the future and what it may hold for us, in the pension’s world anyway!
Normally, around this time of year we ponder on changes we can make in our daily lives and if you do not have a pension plan then maybe starting one could be one of your better New Year Resolutions. You may not feel that you need to save for your retirement but here’s 3 things to consider – The State Pension amount, service gaps and longer life expectancy.
The State Pension
Firstly, think of your annual take home pay which you currently live on. Now, compare that figure to €12,912. Could you live on this amount a year? That’s the maximum State Pension amount for a single person. Will this amount enable you to do all those things on your bucket list that you’ve planned for when you’re finished work? I’ve heard the drop in income from the time you are working to the day you go on to state benefits being described as falling off a cliff. Not a pleasant image and certainly something we all want to avoid if we can.
During your career, have you already or do you plan to take a break for one reason or another? Maternity or paternity leave, home care, rearing of children? This can affect state pension entitlements and can also reduce the number of years you have to save towards your retirement.
Longer Life Expectancy
On a positive note, our life expectancy is increasing; 50% of those born today are expected to live to 100. And indeed some of our CPAS pensioners are over the age of 100 with the oldest being 105! As well as this, the state pension age is increasing and will be age 68 by 2028. While living longer can be good news, what this also means is that our savings have to stretch further and last a lot longer. That €12,912 a year just isn’t going to cut it.
The government want us to save for retirement so what incentives have they given us? Often going unnoticed because people pay pension contributions from their salary at source, the tax break on pension contributions is one of the most generous available from the Revenue. Tax relief is available at your marginal rate of tax and the table below shows you the net cost of a €100 pension contribution based on your current rate of tax.
And the tax breaks don’t stop there.
Employer contributions receive corporation tax relief as they are offset against profits before tax and they are not added to employee’s salary as a Benefit in Kind. Investment growth on pension fund savings is tax free and at retirement, members can receive a sizeable amount of their fund as a lump sum also tax free (subject to Revenue maximum limits). Annual pension income is subject to tax under the PAYE system but as a pensioner the tax allowances are generous.
Now is the time for the construction sector to make a difference to the future of all their employees through pension savings. CPAS can facilitate this on the same terms as site workers through the Construction Workers Pension Scheme or we can design a bespoke arrange for individual employers and members through the Construction Executive Retirement Savings (CERS).
This year CPAS are delighted to be a sponsor of the ICE Awards 2020 and as the providers of choice for the construction industry we are proud to see that over 90% of the Award nominee companies are clients of ours. CPAS talk your language so don’t hesitate to call us today and we can get you started! You can call Paula on (01) 407 1429 or email email@example.com.
It may be well established at this stage that CPAS are considered to be the pension provider of choice for the construction sector, however, it has become quite clear to us in recent times that some might consider the ‘construction sector’ to include only those who work on sites, so we ask the question; are pension savings only for site workers?
Since the introduction of the Sectoral Employment Order (SEO) last year, and the conversations around the #BuildingEquality campaign including the gender pay/pension gaps, we’ve had many discussions with company owners and office staff regarding their own pension provision. These conversations usually take place when they contact us to set up or discuss their site workers’ pensions or when we are arranging site visits to give toolbox talks to their employees in the Construction Workers Pension Scheme (CWPS).
The team at CPAS receive regular phone calls from office staff who manage the pensions for their site workers but they never consider their own savings for retirement. When we ask them about their own pension savings we regularly hear ‘I don’t work on site’, ‘I didn’t think office staff could be included’, ‘I wouldn’t know how to go about it’. It should be said loud and clear – CPAS have a pension solution for the entire workforce in the construction industry.
This includes office staff and management, not just those who work on site. From a survey in 2017, it was found that only a third of private-sector workers in Ireland have a pension plan. Furthermore, 60% of those without pension savings said they don’t actually know how to start one. If you are one of the two thirds who do not have a pension plan in place and think you don’t need to save for your retirement, I give you three points to consider – the State pension amount, service gaps and longer life expectancy.
Firstly, think of your annual take home pay which you currently live on. Now, compare that figure to €12,652. Do you think you can you live on this amount a year? This is the current maximum State pension amount. Will this amount enable you to do all those things on your bucket list that you’ve planned for when you’re finished work?
During your career, have you already or do you plan to take a break for one reason or another? Maternity or paternity leave, home care, rearing of children or just a career break to travel? If you do, this can affect your State pension entitlements and can also reduce the number of years you have to save towards your retirement.
On a positive note, our life expectancy is increasing; 50% of those born today are expected to live to 100. Indeed some of our CPAS members in receipt of a monthly pension have reached the age of 100 with the oldest being 105! As well as this, the state pension age is increasing and will rise to 68 by 2028. While living longer is good news, this also means that our savings will have to stretch further and last a lot longer. Will €12,652 a year be enough?
Taking these points into consideration, it makes perfect sense that everybody who works should be saving towards their retirement. Indeed,the government have issued a Roadmap for Pensions 2018 to 2023 where they are looking to make pension savings mandatory in the next 4 to 5 years.
With the introduction of the Construction SEO in October 2017 and the Mechanical SEO in March 2018, the construction sector have taken the lead in providing pension cover for their workers covered by these SEOs but let’s not forget about all the other workers in the construction sector who may not come under the cover of the SEOs. Now is the time for the construction sector to make a difference to the future of all their employees through pension savings.
CPAS can facilitate this on the same terms as site workers through the Construction Workers Pension Scheme (CWPS) or we can design bespoke pension arrangements for individual employers and members through the Construction Executive Retirement Savings (CERS). For self-employed individuals in the construction sector without pension cover we can also provide cover through the Construction Industry Retirement Trust (CIRT). As the pension provider of choice for the construction sector CPAS knows your industry, so don’t hesitate to call us today and we can get you started!
We all know the many good reasons to contribute to a pension arrangement – but when setting up a pension plan or reviewing your current arrangement, what is important? In this edition of Irish Building Magazine, we offer five points that we believe you should always consider.
Will the pension plan meet your needs? The most important place to start is at the end! When you actually approach retirement and want your pension to start paying out (instead of you continuing to pay in), will your pension provider meet your requirements? Do they offer you a lifestyle investment option nearing your retirement to help you to lock in your gains?
If you decide to choose the pension route, do they offer competitive annuity rates at retirement? If you wish to take a retirement lump sum and transfer to an ARF/AMRF, can they facilitate this themselves or through a partner? The time to find these out is at the very start!
- How much are you paying in charges? Charges are deducted from your pension fund to cover a whole range of services, including administration, fund management costs, trustee costs and 3rd party adviser costs. These are typically bundled together to make them easier to understand and simpler to apply. Charges can have a significant impact on your pension fund. They are necessary for the effective running of a pension scheme, but should be kept to the minimum possible. Beware of funds with many layers of charges, which are complicated to understand. You should always veer towards pension plans with very transparent charges that are easily understood. After all, it is your own pot of money that is being reduced by these charges!
- Investment choices: Your pension arrangement should offer you a diversified range of investment options that can meet your changing circumstances over time – this doesn’t mean that there should be hundreds of funds to choose from – but the options available should cover all the asset classes, i.e. Equities, Bonds, Cash, Property, Alternatives etc. and should be sufficient to offset the main investment risks. The Pensions Authority suggests a choice of between 5 to 7 funds. Almost 85% of members generally choose the default option, so it is vital that if you choose this option it is suitable for your needs and your ultimate retirement goals. Any fund choices you make should be based on the level of investment risk you are comfortable with and should take into account your financial circumstances and goals.
- Good service from an experienced pension provider: It should be a given that your pension provider has the required experience and the systems in place to administer your arrangement in accordance with all the regulatory requirements. Nevertheless, you also need to be confident that they have the quality people and processes to provide you with the information and services you need in a timely manner. So before you take out a pension plan,ask the necessary questions to get a sense of the service you can expect – What online access to information is available? Are they flexible to meet your needs? What qualifications do their staff have?
- Security and Governance: Another of the most important features of pension arrangements is that the money invested on behalf of members is kept completely separate from the company’s own money. It is only there for the members when they retire, and cannot be accessed by the employer or a creditor if the company should run into trouble.
Many employers appoint what is called a “Corporate Trustee” to oversee the management of their pension scheme. This offers an important additional layer of independent protection for employers and employees, and removes the burden from employers of being a Trustee themselves, or hiring a company to provide this service. When choosing or reviewing your pension arrangement these are some of the points to consider but ultimately, the aim of your pension is to provide you with an adequate income in retirement to allow you to maintain a good standard of living.
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