Calculate your Pension
A pension is creating a personal fund for you that you pay into and that grows totally tax free.
Imagine a bucket in your office and your putting cash into it every week. How quickly will it fill up?
That's your pension.
Use the calculator below to see how much you need to trow into that basket on a regular basis to ensure you'll have a financially stress free retirement.
Pensions - How do they work?
A personal pension plan is available to any person who does not have a pension provided by their employer or is a self-employed individual. They are a tax efficient method of funding for income in the years where you will no longer be able to work due to age or ill health.
How do they work?
In return for the monthly contributions that you pay, the insurance company will invest the money in a tax-free fund over the years to your retirement date. The accumulation of your contribution and the investment return gained on your behalf are credited to your plan. This is known as the pension fund cash value.
At retirement date this cash fund is used to buy an annuity or pension for you. If you are married at this stage you can opt to have a pension paid to your wife after your death in retirement. The growth of your fund over the years is entirely tax-free but your pension income will be taxable.
Lump Sum contributions can also be made separately or in conjunction with a regular monthly or annual contribution.
For Company Owners/Directors, they may elect to provide a pension based on:
- The contributions the company can afford
- Contributions to target a specific retirement goal, or percentage of final salary.
What happens at retirement date?
You can decide to take your retirement benefits at any time between age 60 and 75. You may be able to retire early for reasons of serious ill health. The Revenue Commissioners may allow retirement before age 60 if you are permanently unable to work.
When you reach your selected retirement date you can elect to have the following choices:
- Take a pension for life on a joint basis if married. OR,
- Take a tax-free lump sum of 25% of the pension fund value
With the balance of the fund you can then choose a lower pension.
You may decide to take your pension fund in cash at retirement. In that case the fund value is taken out less an income tax deduction. The client is then free to invest the money where they like. Under the ARF/AMRF option a sum of €63,500 must ne invested in an AMRF until age 75. The balance of funds can then be invested in an ARF and left to grow until the client wishes to draw money as an income.
At Retirement you can choose to take the following benefits:
- Pension for life, with a widows Pension included
- Take a tax free lump sum if 1.5 times your final income plus a pension for life.
- Money may be transferred to an ARF or an AMRF
Maximum Pension available at Retirement:
- Maximum pension available at retirement is 66.66% of final salary.
- Retirement age can be any age from 60 to 70 years of Age
- Additional funding may be added to provide benefits for Widows on the member’s death in service or in retirement. The maximum widows pension is 44.44% of final salary.
- Life assurance cover and salary/income protection cover can also be included
- Contribution protection can also be included. This ensures your pension contributions are insured and continue to be paid in the event of long-term absence from work.
Option 1: Buying an annuity
After you take your tax-free cash you can use the balance of your fund to buy an annuity. An Annuity provides you with a guaranteed income for the rest of your life. When you buy the annuity you have several additional options including guaranteeing the period of payment, automatic increases to allow for inflation and providing a pension for dependants.
The options you choose to include will affect the amount of pension your fund can provide. You may use your fund to buy an annuity with any Company you choose.
Option 2: Investing in an Approved Retirement Fund.
Approved Retirement Funds (ARFs) and approved Minimum Retirement Funds (AMRFs) are Funds managed by qualifying fund managers in which you can invest the proceeds of your pension fund when it matures.
After you have taken your tax free lump sum, €63,500 or the remainder of the pension fund if less,must be transferred to an AMRF or used to buy an annuity payable to you. Any balance over €63,500 can be invested in an ARF or withdrawn as cash. Any cash withdrawn at this stage will be taxed as income.
The maximum tax-free lump sum available is 25% of the fund value. I will always recommend that if my client is married at retirement date that the pension be taken on a guaranteed 10 years basis. This means that in the event of my client's death during the first 10 years of retirement his wife will receive his pension cheque for the balance of 10 years. She then will receive a pension of 66.66% of her husband's income for the rest of her life.
What happens in the event of my death prior to retirement?
If you die before reaching your retirement date the full cash value of your pension fund is payable to your wife or to your legal representatives. In the early years the fund will be low but it will build up to a large lump sum. You can add life assurance cover to the pension, which will give a guaranteed minimum level of lump sum coverage to your family in the early years. Tax relief is also available on life assurance cover when added to a pension plan
Optional Extras available on most Pension Plans.
Premium Protection in the event of illness
It is possible to insure your pension contribution if you are out of work due to illness or accident lasting more than 13 or 26 weeks. The insurance company will pay your premium for as long as you are out sick over this initial period and up to your selected retirement date if necessary.
Salary Protection in the event of illness.
It is possible to have your income insured in the event of loss of work due to illness or accident. The maximum level of salary that is insurable is 66.66% of your salary and is payable after 13 or 26 weeks of illness. The benefit can increase by 5% p.a. whilst claiming. The benefit is payable for the duration of the illness or up to the selected retirement date.
Pension Plan for Self Employed & Sole Traders
If you don’t have a pension you are paying more tax than you need to. Have you even thought about when you are going to retire? How much will you need when you do retire?
We know how much the state will give you and we make sure that your pension will make up the difference between state and your present income. And we how to do this and save you tax!
As a self-employed individual you qualify for two different types of pensions.
- Personal Pension Plans are available to an individual who is in non-pensionable employment or does not have access to an employer's pension plan.
- An Executive Pension is available to the owners of their own limited company or as employee of a limited company.
These rates are for the self employed and non pensionable employees. Applies to personal pensions and PRSA's.
Please note these rates do not apply to Company directors
Pensions for Company Owners & Directors
Director's Pension is a Company Bucket
As a Company owner or Director, your company pension is a trust fund created just for you.
- The trust fund is secure from all creditors even when your company is in financial difficulties.
- It is entirely tax free - starting one now saves you money.
- Can be passed on after your death to your partners or family
Not happy with your pension? Coming up to retirement? Talk to me
Starting Business and your Pension Options
Just starting a business and not quite sure what your options are?
- Pensions from previous employers and not quite sure what to do with them?
- Want to know what you should do?
- Should you keep them separate or consolidate?
- And what are the tax implications?
Let Kieran advise you - call us now and find what your best options are.
Tel: 01 495 1970
Pensions for PAYE Employees
Need help unerdstanding your pension options?
- Not quiet sure which is best?
- PRSA or AVCs
- How much tax can you save?
- How secure are different funds?
These rates are for the self employed and non pensionable employees. Applies to personal pensions and PRSA's. Please note these rates do not apply to Compnay directors
Up to 29 years
15% of net relevant earnings*
30 to 39 years
20% of net relevant earnings*
40 to 49 years
25% of net relevant earnings*
50 to 54 years
30% of net relevant earnings*
55 to 59 years
35% of net relevant earnings*
60 years plus
40%** of net relevant earnings*
*. This will be reducing to €150,000 for the tax year 2009
Choices To Make In Retirement?
Retiring and want to know your options?
Want all your options explained? - Know what to do with your AVCs? Know how to budget so you can access funds at different stages in your retirement as you require .
How can you avoid tax?