Self-Invested Pensions for the Self-Employed in Ireland

Self-Invested Pensions for the Self-Employed in Ireland

There are a lot of risks to being self-employed. There are a lot of benefits to it, but one of the downsides is that you have to take care of your own pension. This can be daunting, but it doesn’t have to be!

In this blog post, we will discuss self-invested pensions for the self-employed in Ireland. We will talk about what they are, how they work, and why they are a great option for those who are self-employed. We will also provide some tips on how to get started with a self-invested pension plan.

What Are Self-invested Pensions and Why Should the Self-employed Consider Them?

Pensioners who have amassed funds over time are considering the places where their pension funds are put and the costs that are associated with the investments.

Many are taking the decision to have more control over their retirement plan in the coming years. Over the past ten years, we have seen an increasing trend of self-employed corporate directors/senior executives, as well as retired people, to self-invested pensions.

The Benefits of a Self-invested Pension for the Self-employed

Self-invested pensions permit them to achieve this in a cost-effective way, however, self-invested pensions aren’t an option for all. This type of pension falls under the rules of revenue on pension investing and is not limited to the investment requirements of any particular service supplier and/or Insurance Company.

They are a great option for those who are self-employed because they offer a lot of flexibility and control. With a self-invested pension, you can choose how your money is invested. You can also choose how much you want to contribute to your pension each year.

What type of pension can I take out?

Self-employed people are offered two primary choices regarding pensions:

  • Personal Pension Plan (PPP)
  • Personal Retirement Savings Program (PRSA)

Personal Pensions or Retirement Annuity Contracts (RACs) were traditionally the most preferred option for self-employed people who want to save for retirement due to the numerous advantages the product provides like the more diverse range of investment options, and possibly lower costs and also for self-employed persons have a more varied income (discuss in a future post).

This is a privately owned pension, which is held in your name. It is offered by a life insurance company to which you can contribute a % of your earnings and benefit from tax relief at your marginal rate. Depending on your age you can contribute between 15% and 40% of your earnings, to maximum earnings of €115,000.

This plan could generate a cash amount due to you upon retirement, in exchange for the contributions you make to the plan (these are either periodic or one-time contributions).

Personal Retirement Savings Accounts (PRSA) are similar to personal pension plans and were first introduced in 2002. They are basically a long-term savings contract with substantial tax reliefs available to everyone under age 75. It was designed principally to be a pre-retirement tool that allows individuals to plan their retirement savings flexibly.

A PRSA Pension is retirement savings account that you can access when you retire, at any point between 60 and 75. You are entitled to a 25% lump sum (with the first €200,000 tax-free and the next €300,000 taxed at the standard rate of tax, currently 20%).

When deciding which pension plan is right for you, it is important to seek professional financial advice from a Qualified Financial Advisor to ensure that you are making the best decision for your individual needs.

 

 

PRSA Pension Retirement Options in Ireland What You Need to Know

PRSA Pension Retirement Options in Ireland: What You Need to Know

When it comes to PRSA pension retirement options in Ireland, there are a few things you need to know.

First of all, PRSAs are one of the best ways to save for retirement. They offer a wide range of investment options, and depending on your age, you can contribute between 15% and 40% of your earnings. In this article, we will discuss the different PRSA pension retirement options available in Ireland, and help you decide which is right for you.

What Are the PRSA Pension Retirement Options in Ireland and What Do They Entail?

The Personal Retirement Savings Account (PRSA) is basically a long-term savings contract with substantial tax reliefs available to everyone under age 75. It was designed principally to be a pre-retirement tool that allows individuals to plan their retirement savings flexibly.

A PRSA Pension is retirement savings account that you can access when you retire, at any point between 60 and 75. You are entitled to a 25% lump sum (with the first €200,000 tax-free and the next €300,000 taxed at the standard rate of tax, currently 20%).

For the remainder, you have the option of choosing one of the following choices:

  • ARF (Approved Retirement Fund)

This is your pension fund and you are required to take an income every year. Any income you take is subject to tax at source.

  • PRSA Post-retirement 

You can retain your PRSA Pension Retirement in the form of post-retirement. PRSA (Vested PRSA).  This is similar to the Approved Retirement Fund, above.

  • Annuity

You can purchase a lifetime income from one of the insurance companies. The rate you receive will be based on your age and long term interest rates

  • A Taxable PRSA Lump sum

You can also take the remaining balance of your pension which will be taxed as income.

How Can You Choose the Best Option for Your Needs?

The PRSA Pension Retirement offers a great deal of flexibility to the saver. You must understand all of the options available to you before making a decision. If you are not sure which option is best for you, seek professional advice from a financial advisor.

When you have decided how you want to receive your PRSA benefits, you need to contact the PRSA retirement provider and fill out the necessary paperwork. You will also need to provide proof of your age, identity, and confirm if you have any other pension benefits.

What Factors Should You Consider When Making Your Decision?

There are a few factors you should consider when deciding how to receive your PRSA Pension Retirement benefits. First, think about how much income you will need in retirement. If you plan to retire early or have other sources of income.  You should also consider your health and life expectancy. If you think you may need your PRSA retirement benefits for a long time, an annuity may be a good option. It can provide a lifetime of income, even if you live to be 100!

Deciding how to receive your PRSA benefits is an important one. Be sure to consider all of your options and seek professional advice before you make a decision.

What Is the Retirement Age Under PRSA?

You are allowed to take your benefits once you reach age 60 and before age 75. If you are a member of your employer’s PRSA pension scheme then it is possible to start taking benefits earlier, for instance, when you leave employment after age 50. However, the benefits you will receive are likely to be less than what they would be when you reach the normal retirement age.

Can I Cash in My PRSA Pension Early?

In Ireland, accessing your pension fund before your nominated retirement age isn’t recommended and is usually only permitted in the event of a diagnosis of illness like that brought on by a chronic disability. If you are in this situation and you’re suffering from a serious illness, you may be able to access your pension fund. 

How Does Retiring With a PRSA Pension Plan Impact Your Life?

There are a few ways that retiring with a PRSA Pension Retirement plan can impact your life. First, you will need to decide how you want to receive your PRSA retirement benefits. You can take a lump-sum payment, an annuity, or a combination of both.

Your PRSA Pension Retirement Fund, when you retire, will comprise the total amount of contributions paid to you (and any employer contributions, should you have one) as well as the investment return that you earn from those contributions, less the PRSA fees charged by the provider.

This amount will be a great help upon retirement because it will supplement your state pension and any other income you might have. Newcourt Retirement Fund Managers Limited believes that PRSA retirement pensions are a great way to ensure a comfortable retirement!

Contact your financial advisor today to discuss your PRSA Retirement Options!

Retirement Fund Ireland - Investing in your Future

Investing in ARF for your Future

Approved Retirement Fund (ARF)

An Approved Retirement Fund (ARF) is a post-retirement contract. On retirement from a pension contract and after taking your retirement lump sum, the balance of your pension fund can be invested in an ARF.

You decide where you want to invest and you can withdraw a regular income or once-off cash lump sums from your ARF whenever you want. Any income you make from the ARF will be liable to income tax at your marginal rate plus the universal social charge, and PRSI if you are under age 66. Alternatively, you can choose to use the fund in your ARF to purchase an annuity (an income for life) at a later date.

How Does an ARF work?

Once you are aged 60 years or over for a full tax year it is a Revenue requirement that you make a deemed withdrawal of a certain amount each year from your ARF and pay tax as if you had made an actual withdrawal. Where the total ARF value is €2 million or less, the deemed withdrawal is 4% per annum if you are aged between 60 and 70 years, or 5% per annum if you are aged 70 years or over for the full tax year. The deemed withdrawal is 6% per annum if the total ARF value exceeds €2 million. Any actual withdrawals made by you during the year from your ARF will count towards the deemed withdrawal limit.

Who can invest in an ARF?

People who are under the following categories can invest in a Self-Invested ARF:

  • Existing ARF holders – both Self Administered ARFs and traditional ARFs with Insurance Companies
  • Personal Retirement Savings Account (PRSA) contract holders
  • Personal Pension and Self Invested Personal Pension contract holders
  • Additional Voluntary Contribution (AVC) contract holders
  • Members of Employer Sponsored Defined contribution pension schemes, including Small SelfAdministered
  • Pension Schemes are subject to certain conditions.
  • The minimum age of entry to an ARF is 50 for members of occupational pension schemes and 60 for all 
  • other pension contracts

What Are the Benefits of Investing in ARF?

An ARF gives you greater flexibility in how retirement savings are managed. An ARF lets you keep investing in the market while having the capability to control your retirement fund investment and receive an income that is flexible in retirement.

Your money can be distributed over a variety of investment options that are allowed:

  • Deposit Accounts
  • Direct Property investment (residential or commercial)
  • Choice of International Investment Managers
  • Stockbroking firms
  • Our clients use multiple platforms
  • Full suite of Insurers investments funds
  • Private equity

What Are the Risks of ARF Accounts and How Can They Be Minimized?

The general rule is that higher-risk investments can yield a higher return, whereas low-risk investments typically yield a lower return.

The chance that the capital in your ARF is not able to be used is influenced by three primary aspects:

  • Life Expectancy

Life expectancies rising are certainly an excellent thing and creating a huge strain on the state and pension pots. If you’re thinking about your retirement savings, it’s crucial to be aware of the chance of living beyond the amount you put aside to retire.

  • Inflation

As you age, the inflation rate increases and becomes more of a concern when your income isn’t increasing. This is why you might decide to invest a portion of your retirement funds in order to grow your capital and, consequently your earnings.

  • Income

We all wish to have enough money for a stress-free retirement, however, this is becoming more difficult to attain. That’s why you might want to invest some of your retirement savings in order to generate an income and thus safeguard the amount of your savings.

What Is the Importance of Long-term Investing for Retirement Planning?

One of the benefits associated with investing for the long term is the possibility of compounding. When your retirement fund investments generate earnings, these earnings are invested and could earn more. The longer your money is invested, the better the chance of growth and compounding. 

We at Newcourt Retirement Fund Managers Limited (NRFM) believe that retirement shouldn’t be a nightmare or complicated. You’ve put in the effort to save and earn your money for years now is the chance to relax and enjoy it.

When deciding which retirement pension plan is right for you, it is important to seek professional financial advice from a Qualified Financial Advisor to ensure that you are making the best decision for your individual needs.

Greeting an advisor

What is a Personal Retirement Savings Account (PRSA)

A Personal Retirement Savings Account (PRSA) is a long term pension savings product available to all individuals under the age of 75. It is designed, primarily, as a pre-retirement vehicle enabling individuals to save for retirement in a flexible manner. Tax relief is available on an individual’s personal contributions subject to age and income based limits. Employers must provide a payroll deduction facility for the remittance of employee contributions to a PRSA under the net pay system; employers can also contribute to a PRSA though they are not obliged to do so.

There are two types of PRSA; standard and non-standard. The difference between the two is the maximum charging structure and the type of assets in which you can invest.

A Vested PRSA is the term used to refer to a PRSA contract from which the holder has drawn down their lump sum and leaves the balance of their funds in the PRSA. A Vested PRSA is subject to the same rules as an ARF with regard to deemed distributions.

Investment growth generated by a PRSA and Vested PRSA is exempt from income tax and capital gains tax.

How does it work?

The NRFM Self-Invested PRSA is a non-standard PRSA contract. It offers the PRSA holder the opportunity to manage their retirement funds without the investment restrictions found with many traditional Life Company contracts. The NRFM Self-Invested PRSA is best suited to individuals that have a clear understanding of investment risk and prefer to retain control over the investments they choose for their pension.

Benefits

On retirement, benefits can usually be taken from age 60. Your PRSA allows you to take a certain amount of your pension fund as a retirement lump sum. The maximum lump sum that you can take is 25% of your fund. Up to €200,000 of this is tax free (this is the total of all lump sums taken from all of your pension plans since December 2005) with the balance up to €500,000 taxed at 20%.

You can use the rest of your retirement fund to buy either; an annuity (an income for life), or to invest in an Approved Retirement Fund (ARF) – an ongoing investment.

There is a limit on the maximum fund that can be built up on retirement. This is currently €2,000,000. This figure includes all of your pension funds, including the capital value of any retirement benefits drawn down since 7 December 2005. Where the relevant limit is exceeded, the excess of your pension fund at retirement will be liable to a once off Income Tax charge at the higher rate of tax.

In the event of your untimely death, the value of your PRSA will be paid to your estate.

We at Newcourt Retirement Fund Managers Limited (NRFM) believe that retirement shouldn’t be a nightmare or complicated. You’ve put in the effort to save and earn your money for years now is the chance to relax and enjoy it.

When deciding which retirement pension plan is right for you, it is important to seek professional financial advice from a Qualified Financial Advisor to ensure that you are making the best decision for your individual needs.

How Much is the Irish State Pension?

How Much is the Irish State Pension?

When you’ve worked hard for most of your life, don’t you want to ensure that you have the money necessary to maintain your standard of living in retirement? The State pension in Ireland is €253 per week from January 2022 for a person aged 66 or older. Could you live on the State pension alone, and what would your retirement be like?

The Irish state pension is a regular payment made to retired people living in Ireland. It is funded by the government and is designed to help retirees live comfortably in their old age. However, this acts more as a form of subsistence than anything else, due to the low rate. 

This blog post will discuss how much the Irish state pension is and who is eligible for it. We will also talk about some of the benefits of receiving the pension payment. So, if you are wondering how much you can expect to receive from the Irish government when you retire, keep reading!

Types of Irish State Pension?

There are two types of State pension in Ireland: the contributory pension and the non-contributory pension. The contribution is based on your PRSI contributions while working, whereas the non-contributory pension is means-tested. Depending on your circumstances, you may be eligible for one or both types of pensions.

If you are eligible for the contributory pension, you must have paid PRSI for at least 40 years to qualify. If you have not paid PRSI for 40 years, you may still be eligible if you have a certain number of “stamps

If you are eligible for the non-contributory pension, you must meet certain means-testing criteria. This means that your pension will be based on your current income and assets and the incomes and assets of any other people living in your household.

To find out if you are eligible for the State pension, you can contact the Department of Social Protection. You can also visit their website to calculate your “stamp” entitlement.

The State pension is a vital source of income for many people in Ireland, and it can help make retirement more comfortable. It is important to determine if you are eligible for the pension. With this information, you can plan for your future and ensure that you have the money you need to live comfortably in retirement.

Can I Cash My Pension Early?

We at Newcourt Retirement Fund Managers Limited (NRFM) believe that retirement shouldn’t be a nightmare or complicated. You’ve put in the effort to save and earn your money for years now is the chance to relax and enjoy it.

When deciding which retirement pension plan is right for you, it is important to seek professional financial advice from a Qualified Financial Advisor to ensure that you are making the best decision for your individual needs.

How Much Should I Save for my Pension?

People should be saving as much as is feasible in an ideal world, so the more relevant question is, how much can I afford to contribute toward my pension fund each month?

A person must be 66 years old to qualify for the State pension. As a result, early retirement is not an option if you want to live solely on the State pension. It’s also worth noting that the age at which employees can retire from government service has continued to rise over the years.

It would help if you also considered that people would need more money to live on in retirement as people live longer. The average life expectancy in Ireland is now 83 years for men and 86 years for women. This means that you could be retired for 20 years or more.

Your pension fund will need to last you throughout your retirement, so it’s important to ensure that you are saving enough. The amount you need to save will depend on your circumstances, but a good rule of thumb is to aim to have a pension fund worth at least 20 times when you retire.

If you want to retire with a pension of €50,000 per year, you will need a pension fund of approximately €1 million.

Of course, this is an ambitious goal, and not everyone will be able to achieve it, but it is important to try to save as much as you can for your retirement. The earlier you start saving, the more time your money has to grow, and you are more likely you are to achieve your goal.

Like most people, you probably have many questions about your pension. How much is the Irish state pension? How much should I save for my pension? These are all important questions to ask when you’re planning for retirement.

In Ireland, the state pension is currently €253 per week or €13,000 per year. This amount is subject to change each year, so it’s important to keep updated on the latest rates. You can check the Department of Social Protection website or contact your local social welfare office.

It’s never too soon or too late to begin planning for retirement, which will assist you in achieving the lifestyle and financial stability you desire during your golden years.

Did you find this blog post helpful? Let us know in the comments below! And if you’re looking for more information on retirement planning, be sure to speak to your financial advisor today. Thanks for reading!