Pension Contributions - October November 2011
For individuals who are filing online the deadline to pay a Single Premium payment into a Personal Pension plan (PRSA) is the 15th November 2011. For individuals who are not filing online premiums need to be paid by 31st October, 2011.
Tax Relief on Personal Contributions
The level that one can invest into a Single Premium Pension is based on ones age attained in the tax year. The pensions earning limit is €115,000 for 2010, for instance, an individual aged 50 can invest 30% of net relevant earnings subject to maximum net relative earnings of €115,000, i.e. a total contribution of €34,500 for 2010.
Age Attained in Tax Year |
Personal Pensions/PRSA’s (Employee & AVC) |
Under 30 |
15% of NRE (Earnings) |
30-39 |
20% of NRE (Earnings) |
40-49 |
25% of NRE (Earnings) |
50-54 |
30% of NRE (Earnings) |
55-59 |
35% of NRE (Earnings) |
60 and over |
40% of NRE (Earnings) |
Company Pension Contributions:
Many individuals do not realise that a company can still invest substantial contributions, on behalf of an employee, into a pension scheme. For instance, a company can invest 133% of an individual’s salary, aged 45, into a scheme and obtain corporation tax relief against these contributions.
For a female aged 55, with long service with the company, the contribution could be as much as 432% of salary*.
*Subject to certain Revenue Limits
- There is now a maximum fund threshold of €2,300,000 at retirement, any excess over this amount will be taxed.
- The maximum cash free sum that can now be taken at retirement age is €200,000.
- Individuals who have an ARF (Approved Retirement Fund) are required to take a 5% withdrawal from their fund each year.
- Individuals, who retire, are now required to have a guaranteed pension of €18,000 per annum. If this is not the case, €119,800 is required to be invested into an AMRF (Approved Minimum Retirement Fund) which cannot be cashed until the individual is aged 75.
- The Government introduced a levy on all pension funds excluding ARF’s and PRSA’s of 0.6% per annum. They aim to raise €470 million for the next 4 years from 2011 to 2014. Effectively, this means that individuals who have a fund of say €100,000, are liable to €600 each year – this tax is paid by the Pension provider.
- Up to 41% tax relief on contributions (this may be the last year at this level)
- Widest Investment choice possible, including structured guaranteed products, which provide guarantee of capital return after a specific period together with potential capital growth.
- The maximum fund threshold could be reduced even further in future budgets
The Myths:
I can’t afford to pay into a pension!! I would say that you can’t afford not to!
The State pays pensions out of current taxation. This system is under strain at the moment and we have 6 people working for every one person retired. In 2030 we will have 3:1 and in 2050 we will have 2:1…..it doesn’t take a genius to work out that we have a pensions time bomb in this country and the government will not be able to afford to pay our pensions in the future. Already they have extended the retirement age to 68!
280,000 additional people will reach 65 during the next 10 years.
“There’s no flexibility around pensions”
There is now even more flexibility around pensions than ever before, allowing you to increase or reduce your contributions or take a payment holiday for a certain period of time. It’s important to note that if you decide to reduce or stop your pension contributions it will have a significant effect on your pension.
“Won’t I lose my pension if I die?”
Regardless of the type of pension you are invested in, your pension needn’t just disintegrate if you die. If you have a PRSA, the total fund is payable to your estate on Death.
“All Pension funds have had big falls”
There a wide ranges of investment options from lower risk funds to the more adventurous. When people are further away from retirement they tend to be able to take more risk with their fund choices. This is because the longer they have until retirement the more chance there is of making higher potential gains and recouping any losses they may have experienced. You should understand what your pension is invested in at all times. That way you can be more adventurous if you so wish, or you can move into lower risk funds if you are worried about potential falls.
You can now invest in anything from Managed funds to deposits to commodities to ETF’s to buying and selling shares with a stock broker.
Unique Investment Opportunity:
With the uncertainty of the financial markets today, and clients looking for capital protection on their pensions and investments, we have identified an investment opportunity which will provide clients with 100% capital security, provided by Ulster Bank, which is 83% owned by the British Government. This investment gives clients exposure to one of Europe’s most well recognised and consistent performing funds* The fund is managed by Standard Life Investments, a premier asset manager, who currently manage over £157 Billion on behalf of clients worldwide.
The GARS Fund, which this product is investing in, is the flagship fund for Standard Life Investments. It has the ability to generate returns whether markets are rising or falling and gives clients’ exposure to multiple asset classes. It has a target annual return of cash + 5% per annum and has produced significant returns from its inception in 2006.* The fund currently has over £8 Billion in assets under management spread between individual, corporate, institutional and pension investors.
Global Absolute Return Bond Key Features
Investment Term: 5 Years
Capital Protection: 100% Guarantee provided by Ulster Bank
Underlying: BNP Paribas Standard Life Investments Enhanced Absolute Return Index (Investing in the Standard Life GARS Fund)
Potential Returns: You will receive 100% of any potential gains the Index makes at the end of the term.
Product Closing: 21st November 2011 or earlier if fully Subscribed
Min Investment: €10,000
Open to: Lump Sums, Pensions (existing or new) and ARF’s
Management Fee: No annual Management Fee
This Bond cannot be surrendered before maturity in part or in full until maturity date
All in all we feel that this is a solid investment product providing the capital security clients are looking for in these uncertain times along with exposure to a fund that has a proven track record.
If you think this product would be of interest to you and wish to discuss it further, please do not hesitate to contact me.
*A potential Investor should consult the Product Brochure which can be downloaded from our website or obtained from our office.