Pensions

Pension advice from Financial Architects

You can get advice from us in all areas of pensions.

Did you know you can transfer your pension? Most people leave it sitting for years without checking its performance.

 

Ex employer pensions/ Personal Retirement bonds/ Buy Out Bonds

We help you decide what is the best thing to do with your pension, do not roll all the employer pensions into one lump. This includes giving You control of the funds and risk, which fund manager YOU want, when YOU want to access the pension or if it suits YOU to left it invested into the longer term.

Trustees of employer schemes tend to pick a few generic funds to choose from, we will give you access to several hundred and advise how to invest it in understandable terms.

We assess pension funds under several headings which include performance usually over a 10-year time frame, risk taken during this timeframe, ESMA rating (Risk level 1 to 7) and sharp ratio which shows the efficiency of the fund manager.

 

EXAMPLE (Actual client case): Alan (one of our clients) had worked for 14 years for a Multinational, took a redundancy payment and left his pension behind him. He took another position and was about to transfer his pension into his new employer which makes sense as it “Tidies the pensions up” for him.

However when I pointed out that the fund choice in his new employer was very restricted (Only 5 funds to choose from) and the fact that he is now tying the money up with his new employer for as long as he works there, he reconsidered.

I showed him how his ex-employer fund had performed over the last 10 years compared it to what he could be in and the difference was a mind boggling +200% over this time period. IE it would have done a lot better in the funds I had put him into meaning he wouldn’t have to work as hard and for as long as he thought.

 

Company pension / Director pension

Company owners tend to want to become independent of their businesses over time, so we use the Revenue limit of what can be paid into your company pension.

This has a couple of impacts. Firstly, it reduces your corporation tax bill as pension contributions are a deductible expense. The second is it moves money away from the business onto the owners personal balance sheet, so that for any reason the business stops trading/closes the company owner has accumulated assets which he/she can fall back on when needed, making them more financially independent of their business.

We work out how much you are allowed to contribute, which in most cases is a lot more than a PAYE employee.

 

EXAMPLE (Actual client case).: GH runs his own very successful business, is in his early 40`s, married with two young kids. He knows from the 2008 crash that he does not want to experience the financial hardship we went through again so I showed him what some of my other business owner clients were doing using a concept called max funding which in simple terms means how much will the Revenue allow me to contribute into my company pension based on my years worked, years to retirement and my salary.

When he realised that he could increase his monthly payment (Jan 2019) from €1,500 pm to €4,500 pm he did so immediately, I even phoned him when covid took hold in March and he managed to keep it going. In fact, GH recently (July 2020) asked me if there was any way to put more in again. The funds have grown, his tax bill reduced, and he is becoming more financially independent of his business with each passing year.

 

To find out how much you can contribute use this calculator https://www.zurich.ie/broker-centre/max-funding-calculator/ or get in touch with our office on 01 8027670.

 

Personal Pensions and PRSAs

If you have a personal pension or a PRSA, we can assess and advise you on it.

 

EXAMPLE (Actual client case): CB was introduced to me by his Accountant and is a self-employed business owner- not a company owner. He wanted to see how to reduce his tax bill before October 2018.

So, when I explained what we could do for him, he made a cheque payable for the maximum allowed using age related limits for tax relief. His taxable income for 2017 was €87,000 approx., he is aged 58, so he was able to get tax relief back on a payment of €30,450 (€87k @35% =€30,450), so when he wrote a cheque to the pension company for €30,450, yes it cost him €30,450 but he got a reduction on his tax bill of 40% of the payment which was €12,180 and the best part was that because of his financial set up, he would pay close to zero tax on the pension when he accessed it.

So, he reduced his tax bill and managed to increase his pension fund by €30,450.

Age-related percentage limit for tax relief on pension contributions:

Age                Percentage limit

Under 30       15%

30-39              20%

40-49              25%

50-55              30%

55-59              35%

60 or over      40%

 

Pension options at Retirement

If you are over 55, you probably saved a substantial amount of money over the years in pension funds and are trying to work out if you have enough to retire now or in a few years’ time.  You might also be wondering when you should access it and what retirement options you will have.

There are two main Options At Retirement, Approved retirement funds or an Annuity pension.

We specialise in this area and have a particular way to set them up so that it is more likely that they will last you longer. We also set them up so that when there are market falls, your income is not affected.

When it comes to ARFs (Approved retirement funds), one of the biggest issues is making sure you do not outlive your money, ie it runs out while you are alive.

Using the Drawdown illustration, you can put your details in and see what return you need to make sure you don’t run out of money, or how long it will last.

 

EXAMPLE (Actual Client): Larry was being offered an Annuity pension by his employer pension advisor, he said they were hard to get through to and was a bit unsure about his decision (He had the forms filled in already and about to return his decision in writing to take an Annuity).

So I explained the impact of his death to his wife with an Annuity, I also pointed out that it is not reversible and it is probably the worst time in the last 100 years to be doing it. I explained the background to ARFS, why they were introduced and the fact that they do not disappear on his death but just transfer to his wife.

He definitely liked them, so when I showed him how we set them up so that they should last a lot longer than normal and he had pension income secured for a minimum of the next 5 years regardless of markets, he went for it. €464,000 was invested about 2 years ago, having drawn out €2,000 a month, the fund is still actually higher at €475,000.

This is not the norm when it comes to ARFS, just pointing this out, we advise all our ARF clients that the funds will drop because you are withdrawing the money out. Larry got lucky so far but is very happy.

 

To arrange a meeting to discuss your options at retirement phone our office on 01 8027670, email Derek at d.maguire@financialarchitects.ie or drop into us Financial Architects, Main Street, Ratoath, Co Meath.

Our relevant qualifications in the pension area include:

  • SIA: Specialist in investment assets
  • CFP: Certified Financial Planner
  • RPA: Retirement Planning Advisors
  • QFA: Qualified Financial Advisors

So, it is an area we know well.

Financial Architects t/a Financial Architects ltd is Regulated By the Central Bank Of Ireland.

 

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