No matter which of the routes below is the one for you, they all offer the following pension tax benefits- Tax-deductible contributions, tax-free investment growth and a Tax-free lump sum at retirement
An employer sets up a pension and the employee must be willing to contribute to the plan. Company can also pays for an income protection policy that can cover up to 75% of salary, less any benefits already in place which could be a vital component of retirement planning.
A company director can take out a pension that can be funded entirely by company contributions or director contributions or a combination of both. This is one of main tools that can help in the tax efficient transition of the company profit into your personal wealth. A SSAP mentioned below can be a type of Executive Pension.
– Self-Administered Pensions- (Small Self-Administered Pension Schemes /SSAPS, also sometimes known as a Self-Invested Pension Plans/ SIPPs)
- Maximum control over your investments – offering you the widest choice and control over your pension investments
- Ideal for property investments- Select, manage, and borrow (within limits) against investment property through your pension
- Full pension tax benefits- Tax-deductible contributions, tax-free investment growth, tax-free lump sum at retirement
The Revenue have imposed some limits on what a Self-Administered Pension can hold. The primary rule that affects investors most is that all investments must be at arm’s length. For example; you cannot move a property you already own into your pension. These can offer the widest possibilities for investment using a pension. These can also offer the greatest risks unless there is proper advice available. The list of authorised investments can include:
- Property: Buy-to-let investment property (both residential and commercial); development land; property syndicates;
- Private companies: Shares in private companies
- Listed instruments and mutual funds: equities, bonds, investment trusts, unit trusts, REITS, insurance company funds; offshore funds
- Cash and cash-like assets such as bank deposits
- Debt such as loan notes
- Complex instruments such as futures and options
Personal Pension Plans
Suitable for retirement planning needs of those who are self-employed\sole traders or those in non-pensionable employment.
Self-employed people can also set up Personal Income Protection whereby they claim back tax relief at their marginal rate, similar to pension payments. Tax relief allowed is subject to certain limits and includes pension contributions. This could be a vital component of retirement planning.
Buy out Bonds
Where employees have left employment or where the pension scheme is wound up. The trustees of the Scheme transfer the benefits into the persons own name enabling them to take full control over the scheme. Clients may need to access or consolidate their pensions and this option can help greatly
PRSAs / AVC PRSAs
Anyone who is resident in the Republic of Ireland with a PPSN number can take out a PRSA but only those with “relevant earnings” will be able to claim tax relief on the contributions.
Additional Value Contributions
AVCs are contributions that you can make in addition to your normal contributions to an occupational pension scheme in the public or private sector. They increase your retirement benefits maximising the annual tax relief available within certain limits. This is done with a view to a better/larger Tax-Free Lump Sum or an overall pot of money when the planned retirement time arrives.
Approved Retirement Funds are post-retirement investment plans that allow you to continue to invest your pension fund in retirement and draw down money as you need it, rather than buying an annuity. It is an important area on which you should take advice as you may be giving up a guaranteed income for life.
When retiring, you can buy a guaranteed income for life – the amount of income depends on among other things, the size of your pension funds, your age, health and length that you want the payment to be guaranteed for.
Don’t let your financial situation worry you! If you are unsure whether you are adequately covered or don’t have any in place, get in touch today. We can arrange a complimentary initial consultation with one of our friendly Qualified Financial Advisors.