With the recent changes to pensions in both the Budget and Finance Bill we recommend making pension contributions for the following reasons:
- What will the state pension be in the future?
Demographic changes will put pressure on Government Finances in the areas of health care and pensions. Currently there are 6 adults working for every 1 adult over 65. This ratio is predicted to change to 2 to 1 by 2050 (Source: National Pensions Framework 2010)
- State Pension Age is Increasing
January 2021 increases to age 67, January 2028 increases to age 68
- Life Expectancy
Life expectancy in Ireland is now 76 years for males and 81 years for females. Funds in retirement need to last longer.
- Tax Relief
Income tax relief is currently available on personal contributions and corporation tax relief is available for company contributions.
- Tax Free Lump Sum at Retirement
- Approved Minimum Retirement Fund (AMRF) /ARF Options available for all.
The ARF option has been extended to all members of a Defined Contribution or Occupational Pension Scheme
- Inheritance Tax Planning
Tax Treatment of pension funds on death can result in a tax efficient way of inheritance planning. This is the case in both pre and post retirement.
- Liquid Fund at retirement
With the recent collapse in asset classes over the past couple of years, some of those who reached retirement found it difficult to realise assets such as shares and property. Pensions are liquid assets at retirement age.
- Gross Rollup
Exit Tax on savings and investment plans is 30%. DIRT is 27%. Capital Gains Tax is 25%, with an annual exemption of €1,270. (rates as at 2011)
Pension funds are exempt from Irish income and capital gains taxes however pension income in retirement is subject to income tax at your marginal rate
Pensions allow for a wide range of investment options to suit the risk appetites of every client.
This includes investments in equities, bonds, property, commodities, but also deposits, trackers and other secure options.
With the current volatility in the global markets there are many secure investment options available through the Life Companies for your pension contribution this year.
These include Deposit Accounts in Irish and Foreign Banks, Foreign Government Bonds, Tracker Bonds and Protected Funds.
We recommend considering these type funds for 2011 pension contributions.