#retirement Archives

Our easy guide to understanding your retirement options

Posted on 8 April 20248 April 2024 by QWM_Marketing

When planning for retirement a lot of the conversation is around starting a pension. But what happens after you retire? A pension is a way of saving for retirement but how do you translate that pension into an income in your retirement? What are your retirement options and do you understand them?

The first thing to know is that you can take a portion of your pension fund as a tax-free lump sum. The second is that you have two options – an ARF or an Annuity – to choose from using the balance to turn it into an income. Which option you choose is down to your own individual circumstances and preferences.

What is an ARF?

An ARF (Approved Retirement Fund) is a product that allows you to keep your money invested as a lump sum after you retire. This means you can manage your pension assets in whatever way you prefer and withdraw an income from the fund as you need it. Currently you must withdraw a minimum of 4% of the fund value each year. A big benefit of this type of personal retirement investment fund is that any balance remaining in your fund is payable to your estate after your death. ARFs were only introduced in 1999 but have been growing in popularity since then.

What is an Annuity?

An Annuity would have been the more traditional option at retirement to provide a stable income for the rest of a person’s life. It is a simple retirement payment option that guarantees to pay a particular amount every month in retirement. An annuity is purchased from an insurance company in exchange for the accumulated pension fund. There are a range of different annuity types and it’s important to ensure that the one you choose suits your needs.

Key differences

When considering your retirement options it’s important to understand the key differences between the two product types:

At retirement, an annuity provides a guaranteed regular income for the rest of your life. An ARF allows you to remain in the investment market.
You receive a regular pre-set income when you have an annuity but with an ARF you can withdraw funds whenever you wish (subject to minimum levels and tax).
An annuity gives you a guaranteed income and removes the risk of stockmarket volatility that is associated with an ARF
An annuity will cease once you die but an ARF generally passes to your estate.

Which is the best choice for me?

The answer to this question is down to your own personal circumstances including what other sources of income you may have and your attitude to risk. How you fund your retirement is a big decision and it is important to get advice on the different options and how they work. Just get in touch with us at Quintas Wealth Management if you’d like help in starting to consider your retirement options.

The coming of age for PRSA’s

Posted on 21 June 202322 June 2023 by QWM_Marketing

PRSA’s are growing in popularity having had a very low uptake when they were initially introduced. Our Head of Life & Pensions, Anne O’Doherty looks at this current trend, the drivers behind it and why there is a coming of age for PRSAs.

What is a PRSA?

For many years a Personal Pension was the main option for retirement savings for those who were self-employed or not in a company pension plan. This changed in 2003 with the introduction of Personal Retirement Savings Accounts (PRSAs). In essence, a Personal Pension and a PRSA are designed to do the same thing. That is to provide a way of saving for retirement. They benefit from the same tax treatment and access funds in the same way. But a PRSA was designed to be more flexible and transferable.

What are the benefits of a PRSA?

The main benefits of a PRSA are linked to its flexibility and transferability. These include being available regardless of your job or employment status, being able to increase, decrease or stop contributions at any stage without penalty and being able to transfer to another provider. In addition, a PRSA give you more options at retirement. For example, you can continue making contributions after you retire, while also receiving a pension income.

Can an Employer contribute to a PRSA?

Yes, an Employer may contribute to employees’ PRSAs but are not obliged to do so. Their obligation lies in providing access to the PRSA. Where an employer doesn’t have a pension scheme they need to provide employees with access to at least one standard PRSA. They must allow the PRSA provider or intermediary reasonable access to the employees at their workplace and facilitate payroll deduction of contributions.

Is BIK charged on PRSA contributions?

One of the biggest changes to PRSAs and a driving factor in their growing popularity was the removal of the Benefit-in-kind (BIK) charge on Employer contributions. Where contributions were previously treated as a BIK for the purposes of employee income tax, these contributions will now not attract a tax charge for an employee. Since the 1st of January 2023, Employees can pay unlimited BIK free contributions to a PRSA for an employee including company directors. These contributions will not be limited by salary and service, existing scheme funding or retained benefits.

When is a PRSA a good option?

The flexibility and transferability of PRSAs always made them a good option for certain people. A combination of factors has now thrown this net much wider and makes them attractive in several other circumstances. These include the option as an alternative to a group pension scheme, especially for smaller companies. BIK has been removed and this is a valuable benefit for employees. PRSA’s can be a flexible alternative to a Master Trust in place of an Executive Pension scheme.

Next steps

The flexibility that PRSA’s offer and the breadth of fund choices, now coupled with the additional funding options, make them a very attractive option for those wishing to start saving for their retirement. Several of the product providers have recently launched new PRSA product ranges. This is to ensure that they meet clients’ needs in as easy a way as possible. If you’d like to find out what the best options are for your own circumstances just get in touch with us at Quintas Wealth Management. We’re happy to talk you through your choices.

ARFs and Annuities – what happens after you retire?

Posted on 23 May 202323 May 2023 by QWM_Marketing

We talk a lot about saving for your retirement and starting a pension plan. But what actually happens when you retire? You have built up a pension fund so what do you do next?

There are two main options available for you to choose from at this stage, an Approved Retirement Fund (ARF) or an Annuity.

An ARF is a post-retirement investment fund typically used to invest any retirement funds remaining after taking a tax-free cash. The funds transferred to an ARF can be drawn down in a flexible way during retirement.

An Annuity is an investment option for your pension fund. It guarantees to pay you a particular amount every month throughout your life in retirement.

These two options, while both are for when you retire, provide very different solutions. How to use your pension fund to provide for their retirement is one of the most important decisions you have to make. Which option is the right one for you depends on various factors including value of your fund, level of income required and your state of health.

This recent article in Irish Broker Magazine gives a very good comparison of the two options. We are happy to help guide you through these differences in relation to your own circumstances to help you make the decision that best suits you. Just get in touch today for an initial chat because we know what counts.

5 Top Questions About – Pensions

Posted on 21 September 202221 September 2022 by QWM_Marketing

It’s that time of year again. A lot of people are thinking about pensions to gain the benefit from the upcoming tax deadlines. But there’s been a lot of questions about pensions this year. From market volatility to auto-enrolment, it can seem like a bit of a minefield. Here, Anne O’Doherty, our Head of Life & Pensions answers the most commonly asked questions we have received and shares our view on how best to manage your pension.

I haven’t started a pension yet, when is the right time to do this?

Saving for retirement is extremely important. People are living longer and leading more active lives in retirement. As a result, it is more important than ever for you to think about where your income will come from when you retire. Starting a pension is one of the smartest decisions you can make. The earlier you start the better. But it is also never too late to start planning for the financial future you want. Have a look at this Pension and Retirement Calculator on our website. It can give you help with your retirement planning and to see you how much you need to put away for later in life.

I’ve read a lot of headlines about auto-enrolment recently – what is it?

Quite simply auto-enrolment is a new scheme announced by Government earlier this year. The aim of it is to try to encourage people to make adequate provision for their income at retirement. It will work by having employers automatically enrol their employees into a workplace pension scheme. It is aimed at those people who currently are not in a company pension scheme. The Government has estimated this number to be around 750k between the ages of 23 and 60 (earning more than €20,000). Our recent blog covered all aspects of auto-enrolment, and you can read it here.

Is my pension safe given the current market volatility?

We are being asked this a lot by our clients given the rocky year markets have endured. The first and most important thing to remember is that a pension is a long-term investment. By their nature markets have ups and downs but over the course of an investment these tend to level out. There are many factors that can affect the markets. Volatility is usually caused by political and economic factors, industry or sector changes or even individual company news. While it can be difficult to witness any declines in your portfolio, it is important to apply logic and not act out of emotion. The most important thing for an investor to do is hold their course. History has shown that those who have stayed invested during previous periods of market volatility have achieved their original investment objectives.

I’m getting nearer retirement, should I make any changes to my pension arrangements?

As a general rule you need to be between 60 and 75 years of age to take your pension benefits. If you are are about 10 years from your retirement age, then there are a few things you need to start considering. There are lots of things that you have had to think about to date – building your career, paying the mortgage, educating your children and maybe even saving for a rainy day. These are important. But as you start approaching retirement it’s now important to take advantage of the last 10 years of your working life to make sure you maximise your financial position when you do retire. This can mean increasing regular contributions, making additional lump sum contributions or switching funds to lower risk options. Depending on your own personal circumstances, we can talk you through what the best approach is now.

What is the tax situation for my pension contributions?

It is safe to say that a pension is one of the most tax-efficient ways of saving money. Tax relief is the greatest benefit of saving into a pension. If you’re paying tax at 20%, then you’re entitled to 20% back on pension contributions. If you’re paying tax on your salary at the highest rate, then you’re entitled to get 40% back on any pension contribution that you make. So, it doesn’t cost as much as you may have thought to save for retirement. You can also benefit from higher limits for tax relief as you get older as these are age-related.