1. The State pension will reduce
There are too many retired people to be supported by the working population’s taxes and charges. This is going to get worse, even if the country isn’t broke in the future.
2. State pension age is increasing
We need something to plug the gap netween retiring from work at 65 but not getting the State pension until age 68 (or more).
3. Life expectancy is increasing
If people retiring today at 65 can reasonably expect to live for 23 years, they need plenty of money.
4. Top rate income tax relief is still available on contributions
An investment today of Euro 5,900 means Euro 10,000 in your pension fund for a 41% tax payer. A retired married couple today, where at least one is aged 65 or more, can take a pension income of Euro 36,000 per annum without being liable for any income tax.
5. Lump sum of 25% of the pension fund can be taken
Subject to the Euro 200,000 limit, the lump sum will be tax free. Above that threshold a flat rate of 20% will be charged. Alternatively 1.5 times final salary tax free will be available on company/employer schemes, subject the the number of years service.
6. Wholesale price for life cover
a) Spouse can inherit the entire fund tax free. A defined contribution scheme limits the tax-free payout to 4 times salary plus full fund value of any AVC PRSA.
b) Additional life insurance can be included with the premium qualifying for top rate income tax relief – unlike standard life assurance policies.
7. ARF options for all
Have the option to draw down income as you need it rather than having to buy an income for life (annuity) when interest rates are low.
8. Inheritance planning
The pension fund doesn’t die with you when in an ARF. Instead it can be left to others in a tax-efficient way.
9. Gross roll up
During pre-retirement, the fund accumulates without charges for income tax or capital gains tax.
10. Investment range
There is a huge range of funds in which your pension can be invested. These should be reviewed regularly and be tailored to your risk profile. People who get ongoing advice usually end up with larger pension funds.
Good Financial Housekeeping