Pensions

Generally people are living longer and leading more active lives in retirement.
As a result it is more important than ever for you to think about where your income will come from when you retire. Your state pension will provide you with a basic level of retirement income, provided you qualify. When planning for retirement you will need to decide whether this is enough to live on in retirement and if not where your additional income will come from. Independent Financial Consultants will help you to take control of your retirement planning and make decisions regarding your pension.

Broadly speaking most peoples' pensions come from one or more of the following:

1. An occupational pension scheme (also known as a company pension plan)
2. A PRSA (Personal Retirement Savings Account)
3. A Personal Pension Plan (RAC - Retirement Annuity Contract)
4. The State Pension

The Facts

· Only 59.8 % of the adult Irish workforce between 45-54 years of age, currently have private pension coverage.

· 53.2 % of women in the Irish workforce DO NOT have private pension coverage.

A man retiring at 65 now can expect to live to 83 and a woman retiring at 65 can expect to live to 87! It takes a long time to save for retirement and the earlier a person starts to contribute to a pension, the better.

Company Pension Plans
Company pension plans, or occupational pension plans as they are sometimes known, are set up by employers to provide retirement and death benefits for their employees. There is no legal obligation on a company to set up a company pension plan. These plans are normally set up either under trust or on a statutory basis. Statutory plans are set up by legislation and provide benefits for employees in the public sector or semi-state bodies.

Types of company plans
There are two types of company pension plan:

Defined benefit plans provide a set level of pension at retirement, the amount of which normally depends on your service and your earnings at retirement.

Defined Contribution plans, where your own contributions and your employer's contributions are both invested and the proceeds used to buy a pension at retirement. The level of your pension will depend on the amount invested, the return on your investments and the cost of your pension at retirement.

In the past many company pension plans only catered for full-time employees. However following part-time worker legislation in 2001 this is generally no longer the case. Employers must now provide prorate benefits for part-time employees who work at least 20% of the time worked by a comparable full-time employee, unless there are special circumstances whereby part-time employees need not be included.

New legislation in 2003 in respect of fixed term employees means that in many cases employers will need to make their company pension plans available to such employees. Many plans aim to provide 2/3rds of a member's basic salary after 40 years' pensionable service calculate the pension entitlement on the member's basic salary less 11/2 times the State Pension.

Contributions
Members are often asked to contribute toward the cost of a company pension plan. Contributions tend to be set as a percentage of salary. In a defined contribution plan the employer's contribution is set out in the plan's documents. In a defined benefit plan the employer normally pays contributions at the level needed to fund the benefits promised.

Member contributions
Your contributions to a company pension plan will normally be paid through payroll. As a result you will receive immediate and automatic tax relief together with relief from PRSI and the health levies. You do not have to claim this relief. The maximum contribution rate (as a percentage of total pay) on which you can receive tax relief is:

Highest age at any time during the tax year

Rate
Under 30
15%
30-39
20%
40-49
25%
50 or over
30%

For tax relief purposes these contributions are limited to earnings up to a maximum of €254,000 in any tax year.

Employer contributions

You are not taxed on any employer contributions paid to a company pension plan.

AVC - You would benefit from independent advice on Additional Voluntary Contributions's
as your employer will normally only recomend the existing scheme.
Don't forget its your money - choose your own outcome

Investments

All funds invested in a company pension plan roll-up free from income tax and capital gains tax.

Investment of contributions
If you are a member of a defined contribution plan you may be provided with a range of investment options. You should carefully review the information provided on any option offered before making any decisions. It is important that you periodically review any investment decision taken, especially in the years running up to retirement as you may wish to protect any investment gains made.

If you are unsure about your Pension - give us a call and we will give the best advice that we can to you.

Contact us for a Free Initial Discussion about your Pension requirements:

• Tel: 01-6601 016
• E: info@ifcfinance.com