The document summarizes changes to pension rules and tax benefits announced in Ireland's 2011 Finance Budget. It notes that the changes will impact individuals differently depending on factors like employment category and proximity to retirement. Key points include reductions in tax relief for employee pension contributions and the earnings cap for tax relief. It stresses the importance of seeking professional advice to maximize pension savings and benefits in light of the new rules.

1. January 2011
TALKING PENSIONS
...IT’s your reTIremenT
Introduction
Your retirement savings plan is the most important Pension advice has never been more important. Many
savings plan you will ever contribute to. It can provide significant tax benefits remain and a Pension is still the
you with the security of a regular income to provide for a best value savings plan available today. You now have
comfortable standard of living for the rest of your days. a window of opportunity to take full advantage of the
attractive tax benefits of saving into a pension in 2011.
Following the recent Finance Budget for 2011, the
tax benefits of saving into a Pension have changed To maximise your pension savings, it is important that
to varying degrees for those in different employment you seek professional pension advice tailored to your
categories. In this newsletter, we have outlined how personal circumstances now.
these changes may affect you.
summary of Budget changes
Following the announcement of the Finance Budget 2011 there are a number of changes to the area of retirement
savings which may affect you depending on:
n your personal financial circumstances
n your employment category
n your term to retirement
Pre-reTIremenT PosT reTIremenT
n No change to maximum 41% income tax relief on n Introduction of ARF (Approved Retirement Fund)
personal pension contributions flexible option for employees of defined contribution
n Removal of PRSI and Health levy relief on pension pension schemes
contributions for employees n Increase in ARF annual imputed distribution to 5%
n Reduction of annual earnings cap for purposes of per annum
personal pension contribution tax relief to €115,000. n New retirement tax-free lump sum cap of €200,000
Contributions paid before the self-assessment n Reduction of Income Tax exemptions for those over
deadline of 31 October 2011 to be offset against 2010 65 years to €36,000 p.a. for a married couple
must be in line with the new earnings cap
n Reduction in Pension Standard Fund Threshold
to €2.3 million. This includes any benefits taken
since December 2005
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2. PensIon CHeCKLIsT
APPLICA
BLE
TO E VE R early retirem
Half-your-age rule: YONE ent: APPLICA
BLE
out half If you want to TO E VE R
You should be saving ab retire at age 60 YONE
your could have a ga , you
of your current age as a percentage of p of up to 8 ye
30, you should be you are eligible ars before
income. So if you’re age r
for the State P
ension.*
saving 15% of your annual income. Fo You could brid
ge this gap by
00 that’s about €500 your pension no topping-up
someone earning €40,0 €295 w.
a month but co uld actually only cost you
ief. *National Pens
after higher rate tax rel ions Framewor
k 2010
Late starter: APPL
IC
TO E V A B L E APPLICA
Depending on your age, ERYO BL
NE E
save up to 40% of your
you can Check your expected TO E VE R
YONE
personal income into Pension Income:
a pension and get full tax
relief so even if can
you’re starting your pens What level of pension and lump sum
ion late, there’s still
you currently expect at retirement? Will this
time to catch-up!
to 25
be enough money to last you for up
years in retirement?
FOR
Bridge the Gap
employer Pension:
EMPLOY
EES : FOR PUB
LIC
yer has At the momen S E C TO R
Check wh ether your emplo t the absolute WORKER
eme. You could maximum pens
established a pension sch
S
ion you can ge
nity to have 3 sources public sector pe t from your
be missing the opportu nsion scheme
ment (your employer, grade salary an is half your
help you save for retire d that’s if you
) into a plan with only credited with at work / are
the government and you least 40 full ye
ars service.
1 beneficiary - you!
But you can m
aximise your pe
at retirement nsion benefits
by topping up
an AVC (Additi your pension w
onal Voluntary ith
Contribution).
Late starter: FOR S
ELF-
EMPL
Depending on your age, O YE D
you can
save up to 40% of your
personal income into FOR COM
a pension and get full tax PANY
relief so even if Tax savings: DIRECTO
you’re starting your pens RS
ion late, there’s still
time to catch-up! Avail of this amazing tax saving
y could
opportunity - currently your compan
tax-free
pay up to 4 times your salary income
into your pension, every year until
retirement.*
retiring at age 60, provided he
*Based on a married male age 55,
has no other pension benefits. Applies only to Executive
Pension Plans.
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3. I am approaching retirement
The recent Finance Budget announcements for 2011 will have a direct impact on your pension planning. To maximise
both your pension savings before retirement and your pension benefits in retirement, it is important that you seek
professional pension advice tailored to your personal circumstances now.
For example, the Finance Budget announcements may change the way in which you save into a pension plan and the
way you plan to take your retirement benefits. So now is the time to discuss how this will affect your personal situation
and decide on an appropriate action.
PensIon CHeCKLIsT:
Check your expected Pension Income: early retirement:
What level of pension and lump sum can If you want to retire at age 60, you could
you currently expect at retirement? People have a gap of up to 8 years before you are
are living longer - will this be enough eligible for the State Pension.* Why not
money to last you for up to 20 years in bridge this gap by topping-up your private
retirement? pension today so that you can choose your
retirement date.
Plan your retirement Date:
Recent Government proposals may impact Company Directors:
on how you plan to take your retirement Avail of this amazing tax saving opportunity
benefits, so now is the time to discuss how - currently your company could pay up to
this will affect your personal situation and 4 times your salary income tax-free into
decide on any appropriate action. your pension, every year until retirement.**
maximise your tax-free Pension savings: Check your Pension Fund:
Now is a good time to meet with your Now is also a good time to review your fund
Financial Adviser to ensure your pension choice, especially if you are considering
fund is on track. Depending on your age you opting for an Approved Retirement Fund
can save up to 40% of your income into a (ARF) at retirement.
pension and get full tax relief!
Check employer & previous Pension
Top-up Pension Payments: Arrangements:
Do you need to increase your AVC What benefits, if any, will you receive
contributions for the next 5 to 10 years to from your current or previous employers at
reach your expected retirement fund? retirement?
* National Pensions Framework 2010
** Based on a married male age 55, retiring at age 60, provided he has no other pension benefits. Applies only to Executive Pension Plans.
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4. "Our business grows by referral; do you know a friend, relative or
business colleague who would benefit from our advice?"
PGM Financial Services
Patrick McEntee QFA, FLIA (Dip)
10 Histon House
Cornelscourt Village
Dublin 18
Phone: +353 1 2897400 | Fax: +353 1 2897405 | Mobile: +353 086 2570975 | Email: Patrick@pgm.ie
PGM Financial Services Ltd is regulated by the Financial Regulator.
Directors: P.G. McEntee (Managing) S. McEntee Registered in Ireland No: 394505
Revenue limits, terms and conditions apply. It is important to note that tax relief is not automatically granted; you must apply to and satisfy the Revenue
requirements. Your benefits at retirement may be subject to tax.
While great care has been taken in its preparation, this newsletter is of a general nature and should not be relied on in relation to a specific issue without taking
appropriate financial, investment or other professional advice. The content of this newsletter is for information purposes only and does not constitute an offer or
recommendation to buy or sell any investment, or to subscribe to any investment management or advisory service. If there is any conflict between this newsletter
and the policy conditions, the policy conditions will prevail.
The information contained in this newsletter is based on our understanding of current and intended legislation, and Revenue practice as at January 2011.
WArnInG: THe FIGures ConTAIneD In THIs neWsLeTTer Are esTImATes onLy. THey Are noT
A reLIABLe GuIDe To THe FuTure PerFormAnCe oF your InvesTmenT.
WArnInG: THe vALue oF your InvesTmenT mAy Go DoWn As WeLL As uP.
WArnInG: your InvesTmenT mAy Be AFFeCTeD By CHAnGes In CurrenCy exCHAnGe rATes.
January 2011
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