Retirement Planning & Pensions
Retirement should be the time of your life when you can really make the most of your freedom. But to be truly carefree, your financial situation needs to be rock solid. Effective retirement planning is crucial to be able to live comfortably (if not lavishly) in later life, and it should begin as early as possible.
Planning
Retirement planning is spilt into two phases:
- Accumulation stage
- Retirement stage
During the accumulation stage, you need to ensure you have adequate pension provision and also need to consider the tax implications. We can review existing pensions and advise on new plans where necessary.
We often find, particularly with old-style pensions, that charging structures are too high, which can significantly affect the end payout. Our focus lies with ensuring plans provide the benefits required with minimal charges.
As we offer comprehensive financial planning advice, we can also make sure your finances are as tax efficient as possible and can recommend ways to combine tax and pension planning for individuals, partnerships and companies to make the most of all possible tax saving opportunities
Range of Pensions
At Farrell Financial Services we offer a range of pensions that are tax-efficient now, and take the strain out of providing for a comfortable future in your retirement.
Click here to visit the Pensions Board's Pensions Calculator which allows you to estimate how much you should be contributing to ensure adequate pensions coverage in retirement.
For practical tips and useful guide to pensions, download the Financial Regulator's booklet 'Pensions Made Easy'.
What next?
What type of pension suits you depends highly on your employment status.
Personal Pension Plans
If you are self-employed or working as a sole trader, you can have a personal pension plan to provide you with financial security when you retire with the benefit of immediate financial reward - every euro you save reduces your income tax bill.
PRSA
A PRSA is a Personal Retirement Savings Account. It's a portable retirement account so you can take your PRSA with you when you change job. Your employer can contribute to your PRSA, unlike a personal pension where employers can't make contributions.
PRSA Benefits
- Tax relief on PRSA contributions
- Any investment growth on your PRSA is also tax-free
- Flexibility - you decide how much to contribute to your PRSA
- Take your PRSA with you when you move jobs
- Stop and restart PRSA contributions at no extra cost
Additional Voluntary Contributions (AVCs)
If you are a member of an occupational pension scheme, then you may be in a position to improve the benefits you receive on retirement by making AVCs through a PRSA.
Executive Pension Plans
An effective retirement planning tool that enables business owners, company directors and key employees to plan for their retirement in a tax efficient manner.
Company Pension Plans
In a company pension plan your employer must pay at least one-sixth of the total amount into your pension plan with you. Your employer will get tax relief on this money paid in for you, making it a very tax efficient way to reward employee's loyalty.
Additional Voluntary Contributions (AVC)
If you are in a company pension plan and would like to increase your retirement benefits to get a better pension you can make 'Additional Voluntary Contributions' with your employer's permission.
Retirement bond
A retirement bond lets you take your pension entitlement with you when changing job without having to transfer to your new employer's pension scheme.
Benefits:
- no need to transfer to your new employer's pension scheme
- choose the fund that your money is invested in
- choose when to take your benefits
- any investment growth is tax-free
Approved Retirement Funds
With an Approved Retirement Fund you manage and control your pension fund after retirement. You can make withdrawals at any time, subject to the terms of your chosen investment option. These withdrawals are liable to income tax.
You can invest the proceeds of your pension fund in anApproved Retirement Fund (ARF) after you retire.
Benefits:
- Regular income from this fund
- Control over your investments
- The funds in your ARF are available to your family after your death
If your guaranteed annual income is under €12,700 you must take out an Approved Minimum Retirement Fund (AMRF) first. €63,500 of your retirement fund is put in the AMRF and the rest into an ARF.
Options at Retirement
Now that you’re about to retire, you have one more important decision to make - how to use your pension fund to provide yourself with an income throughout your retirement.
Depending on your circumstances as you approach retirement, there are different options for you to consider.
You have the option to take a tax-free lump sum and use the balance to:
Purchase a pension (Annuity)
In certain circumstances you can invest in an Approved Retirement Fund (ARF)
In certain circumstances you can take a taxable lump sum
Annuity
No matter what type of pension plan you have, you have the option of using some (or all) of your retirement fund to purchase a pension. This will provide you with a regular secure source of income for the rest of your life.
Approved Retirement Fund (ARF)
An ARF may be an option for you on retirement.
The benefits of investing in an ARF are:
- You can manage and control your retirement fund
- Invest in a range of different investment funds tax-free
- You can set up an ARF to pay you a regular income
- You can make withdrawals, as and when you require
- You can pass it onto your dependants
Taxable Lump Sum
An ARF may be an option for you on retirement.
After you take your tax-free lump sum, you may be able to take the rest of your fund as a cash lump sum. You will need to pay income tax on this.
