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The Cost of Delay

The Cost of Delay. Eugene Raftery PenPro email eraftery@penpro.ie 14 Priory Hall Landline 01 2000100 Stillorgan Mobile 087 1229095 Co. Dublin. What is a Pension?.

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The Cost of Delay

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  1. The Cost of Delay Eugene Raftery PenPro email eraftery@penpro.ie 14 Priory Hall Landline 01 2000100 Stillorgan Mobile 087 1229095 Co. Dublin

  2. What is a Pension? • Deferred Income • Income you put off earning today in order to have income later when you have retired and are no longer working • The need to enhance any State Pension entitlements • To claim Tax Relief today • To get growth on your and the Taxman's money without paying DIRT • To build up a pot of money. You and the Taxman

  3. State ContributoryOld Age Pension • Currently €11,975 pa €230.30 pw • With dependent adult €22,703 pw * • Based on having paid PRSI contributions. (Correct number and correct type) * Means tested

  4. 45% 56% 63% 70% 77% 80% Drop in income if relying solely on State Pension pensions Current Income €40,000 €50,000 €60,000 If Single €11,975 If Dependent Spouse €22,703

  5. 102% 62% 43% 32% 24% 19% 15% The cost of delay pensions Replacing your income - % of salary needed Target of 2/3 salary @ age 65 Age Now 25 30 35 40 45 50 55 65

  6. The earlier you start Pension produced by a 20% Contribution

  7. MALE 22 years FEMALE 27 years 18 years 22 years 14 years 18 years It’s just for a few years, isn’t it? pensions People are living much longer in retirement From age 60 LIFE EXPECTANCY From age 65 From age 70 25 0 5 10 20 30 15

  8. Tax Relief • Full Income Tax Relief • Relief either at 41% or 20% Depends on your rate of tax • Gross Pension Contribution: €100 €100 Tax relief: €41 €20 What it costs you: €59 €80

  9. Tax Relief Manual Pension Payment €4000 Tax Rebate/Credit €1,640 @41% €800 @20%

  10. How do I pay • If you pay through Payroll Tax Relief can be granted at source. • Pension can also be paid manually • 31st October is end of previous tax year • Claim back/offset tax from last year

  11. What Tax do I pay ? • 20% Tax Cut Off points • Single Person €32,800 • Married – One income €41,800 • Married – Two Incomes (€65,600) • Bigger earning spouse €41,800 • Lower earning spouse €23,800 • Married – Two incomes similar • €32,800 each (same as single person)

  12. Pension Contribution Limits • Age % of Gross Earnings • Up to age 30 15% • 30 – 39 20% • 40 – 49 25% • 50 – 54 30% • 55 – 59 35% • Over 60 40% • Maximum Revenue Salary €115,000 • If pension benefits more than €65,000 pa no relief

  13. Types of Pension Plans • Company Pension Plan • Set Up Under Trust • Employer & Employee Contributions • Can be used to provide Life Assurance Cover for staff • Personal Pension Plan • Personal Pension • PRSA • Very similar Personal Pension • Very portable • Employer & Employee can contribute into • Designed by Government • Employees must have access to one if they want • Employer must have a designated PRSA Provider

  14. What happens when I retire • Tax Free Cash (Currently €200,000 limit) • If set up under a Company Plan 1.5 times salary (Subject to service) • If set up under a Personal Pension/PRSA 25% of fund • Balance of fund used to buy a Pension or transfer to an ARF

  15. Buying a Pension • Pension Rates • Female age 65 4.61% • Male age 65 4.95% • If you had pension fund of €100,000 (Your contributions, tax relief and growth) • Female Pension €4,610 pa €88 per week • Male Pension €4,950 pa €95 per week

  16. Approved Retirement Fund • An ARF means you do not buy a Pension • You retain ownership of the Fund • It can be inherited • No Dirt Tax while in the ARF • You pay normal Income Tax and USC upon drawdown, same as pension income

  17. Life Assurance through your Pension • Life Assurance paid under a pension plan can get tax relief on cost of cover

  18. Income Protection • Insures your salary if unable to work due to accident or illness • Guarantee a percentage of salary up to 75% • The cost is allowed for Tax Relief

  19. Income Protection Benefits and Costs • Age 30 next birthday • Benefit €20,000 pa, €384pw €3.81pw • Age 35 next birthday • Benefit €25,000 pa, €480pw €5.48pw • Age 45 next Birthday • Benefit €35,000 pa, €673pw €10.89pw Payable after 26 weeks to age 60

  20. Thank you and any questions? Eugene Raftery PenPro email eraftery@penpro.ie Landline 01 2000100 Mobile 087 1229095 14 Priory Hall Stillorgan Co. Dublin

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