Independent Trustee Company Blog

Tuesday, September 24, 2013

A Question of Income



“The question isn’t at what age I want to retire, it’s at what income”.
-          George Foreman

While we await the fall-out from the increase in the State Pension Age to 66, due to take effect on 1st January 2014, and the unknown changes to the pension regime, anticipated in Budget 2014, George Foreman’s declaration gains particular relevance for Irish pension savers.

What measures affecting pensions are we likely to see in October’s Budget?
Last year the Minister announced that the Government would introduce measures to ensure that tax relief on pension contributions would only serve to support pensions that deliver an annual income of up to €60,000.  This aim is likely to be achieved by reducing the maximum allowable pension fund (the standard fund threshold - “SFT”). The threshold will potentially be reduced to anywhere between €1.2m and €2m. 

If the current system of valuation is maintained, i.e. by using a multiple of 20, then a reduced SFT of €1.2m could be introduced.  That would affect all those with defined contribution arrangements as it is not realistic to expect €1.2m to produce an annual income level of €60,000.  Some in the industry, therefore, are lobbying for a more realistic multiple of 30 times to give an SFT of €1.8m.  Of course, an increase in the multiple, while favouring defined contribution pension schemes, could see a higher number of defined benefit pension entitlements affected by the threshold.

A further consequence of the reduction in the threshold, and this is likely to be more important to the majority of pension savers, will be a reduction in the retirement lump sum.  Currently up to €200,000 of a pensioner’s retirement lump sum may be taken tax-free and further lump sum entitlements up to €375,000 may be claimed at 20% tax.  A reduction in the SFT could also lead to a corresponding reduction in the amount of the lump sum available at the 20% tax rate.   If this also leads to a corresponding reduction in the €200,000 tax-free lump sum, a large number of pension savers could be affected.

Realising that we possibly can’t change much about the upcoming Budget, we could adopt a defeatist attitude. Foreman took a different approach to his retirement and famously invented a grill.
Similarly, pension savers facing the unknown may also take precautions.  So, if you are close to or have passed your retirement age, you may consider whether to draw down your pension now.  It can continue to grow tax free in an Approved Retirement Fund, but you could avoid the possible reduction in the lump sum benefits.  If you decide that you are too young to retire you can later change your mind and fund a new scheme.

If you are close to the standard fund threshold or in the fortunate position of having made investments which will bring you above it before your retirement, you may similarly consider the retirement option or avail of the temporary measure to draw down 30% of your AVCs – in order to avoid the punitive tax.

If on the other hand you have no intention of hanging up the gloves or are far off any of the thresholds, the best advice is to avail of the tax benefits of the current regime to the greatest possible extent.  Tax relief on pension contributions continues to be beat all other reliefs in the tax code.  The best precautionary measure against the unknown is to make your pension contributions now!

Tuesday, September 17, 2013

Top 3 ITC Blog Posts in 2013


The ITC blog, Independent Talk, is a form of communication which we use to ensure that you are kept up to date on any recent legislation changes, industry news and ITC updates. This is also a great platform to discuss and debate industry issues, provide technical assistance and to generate ideas.  A blog is not just for bloggers…. Subscribe to Independent Talk, the ITC blog, and keep up to date on Industry news, Tax & Legislative changes and don’t be left in the dark!

For those of you who are not subscribed to the ITC blog or any blogs, you have being missing out! With over 200+ subscribers and almost 24,000 views, the ITC blog has been a successful journey to date.  To follow are the 3 most popular blog post topics on Independent Talk in 2013:

3.  Ignoring the Elephant in the room
The Social welfare and Pensions (Miscellaneous Provisions) Bill 2013 was announced by the Minister for Social Protection, Joan Burton TD on 22nd May 2013.  The main pension provisions of the Bill are discussed in this post, which was the third most read post on the Independent Talk blog.  Click here to read the full article.

2.  Fianna Fail pension strategy launch
The Fianna Fail pension strategy, launched in April 2013 by Willie O’Dea, deals with several issues close to our heart:

·         The funding requirements for DB schemes
·         The priority order for DB schemes on wind up
·         Early Access to Pensions and
·         The issue of Pension Charges

Click here to read the full article.

1. Public sector pension changes
The Public Service Pensions (Single Scheme and Other Provisions) Act 2012 was enacted in July 2012. It will facilitate the introduction of a new Single Pension Scheme for all new entrants to the public service.  This includes the civil service, education sector, health sector, local authorities, Gardai, Defence Forces, regulatory sector and non-commercial semi state bodies. It also includes Oireachtas members and the Judiciary.  The new features of the scheme are discussed in this blog post.  Click here to read the full article.

What do you want to see more of?
As part of the recent Advisor survey, the areas of interest for future blogs are primarily in tax changes, legislative changes, reasons for Self- Administration and industry news and development.
These subjects and all relevant industry updates will be covered on upcoming blogs. If you have any further areas of interest which you wish to see discussed, please feel free to contact us on justask@independent-trustee.com.

How to Subscribe to the ITC Blog

To subscribe to the ITC Blog visit Independent Talk and enter your email in the box provided on the right hand side of the page.

Thursday, September 12, 2013

The Good, the Bad and the Ugly – the revised Revenue Pensions Manual


When you have finished cringing at the admittedly appalling juxtaposition of a classic of its genre and a somewhat unexciting piece of work, you will probably have to agree that the Revenue Pensions Manual is a critical document for anyone practising in pensions, be they providers or advisers.  And it has been recently revised by Revenue with changes being made to several chapters and new ones being written.

A detailed review of the changes is beyond the scope of this blog, but it suffices to point out that some aspects of the revised manual are, well, good, others are bad and some are a bit ugly.

First, the good. Chapter 22 on Pension Adjustment Orders confirms that either a pension adjustment order or a property adjustment order can be used for ARF and AMRF benefits.  Previously there had been a concern that a transfer of benefits from an ARF/AMRF to the ARF/AMRF of a spouse, on foot of a property adjustment order, would give rise to a distribution for tax purposes and a consequent income tax hit.

The same section of Chapter 22 confirms that the recipient spouse or civil partner can set up an ARF without qualifying for it under the Taxes Consolidation Act.  While this is to be welcomed, it does seem remarkable that Revenue has the discretion, with no legislative authority, to grant tax relief for a whole segment of society. 

As for the bad, it’s not that the changes are bad – it’s more the lost opportunity to correct some issues that are crying out for change.  For example, the manual continues to provide that a proprietary director who takes their benefits due to ill-health must dispose of their shareholding.  While there may be some justification in making the disposal of shares a condition of early retirement - to prove genuine withdrawal from service where the person is otherwise fit (though one would think that a P45 should do the trick) - there seems no reason why a person who has to retire because of ill-health should be subject to the same condition.  This requirement may have been imposed in error because Revenue systematically put the rules on ill-health in the chapter on early retirement.  And in practice Revenue even demand the sale of shares in cases of retirement due to serious ill-health - these are the cases, known as the death’s door concession, where the member only has weeks rather than months to live.

As for the ugly, and admittedly this is just a pet peeve of mine, I would have preferred it if the whole manual had been treated as a single document and someone had gone through it with a view to making it more readable or even to format it consistently.  Granted, this is not an easy task with what is essentially a very dry and rule-bound subject, and it is probably a resource issue (and that cannot make things easy), but given that it is a primary source material for an important, albeit often unacknowledged, area of most people’s lives it is a shame that there wasn’t time for someone to give it the care and attention I feel it merits.

One final comment concerns the process by which the manual is put together.  There seems to be a lack of consultation in the production of revisions to the manual.  For example, our understanding is that the Revenue officials who deal with advisers on a day-to-day basis have little input into the manual.  That is a pity because surely they are the ones who know the kind of issues that are relevant to advisers and, more importantly, pension scheme members.

And, apart from consulting those closest to the issues, perhaps Revenue might also enter into a consultation process with the industry, in the same manner practiced by the Pensions Board and the Central Bank, before engaging in further updates of such an important policy document as the manual.  Such an approach may benefit all parties involved, to include Revenue.

It would also save us from blogs with excruciating headlines.

Head of ITC Consulting and Group Legal

Thursday, September 5, 2013

4 Reasons to Recommend ITC


Independent Trustee Company are delighted to announce that we have been shortlisted in four categories for the Irish Pension Awards 2013. The awards, which will take place on the 27th of November 2013, aim to give recognition to pension funds and providers who have proved their excellence, professionalism and dedication to maintaining high standards of Irish pension provision.

The categories that we have been shortlisted for can be seen below.

  • Pensions Consultancy of the Year (ITC Consulting)
  • Pension Scheme Administration of the Year (ITC)
  • Communication Award (ITC)
  • Innovation Award (ITC) (ITL)

We are delighted to be shortlisted in the category nominations listed above. More information on the awards can be found here.

Thursday, August 15, 2013

'Lots of talk but no action to tackle pensions crisis'


Aidan McLoughlin, Group Managing Director of Independent Trustee Company, last week advised that Ireland needs a pensions minister to grapple with the crisis facing the sector.  This issue is further addressed in an article on the Independent.ie website on Thursday August 15th.  Click here to read the full article.

Monday, August 12, 2013

Job Vacancy: Minister for Pensions


Aidan McLoughlin speaks about the need for a dedicated pensions minister in Ireland on RTE Radio 1's 'Morning Ireland'.  

Aidan states "There has been much talk about Ireland emulating the pension regime of other countries, Australia and the UK in particular. Critically, each of those countries has a dedicated pensions minister at a time when reform was required."


Click here to listen to the full interview.

Thursday, July 25, 2013

The Young IBA Croagh Patrick Climb, 2013



Saturday, July 20th, saw over 160 Insurance industry colleagues climb to the top of Croagh Patrick in aid of a very worthy cause; Saint Vincent de Paul charity.  This event was organised by the Young IBA and was a resounding success.  Everyone reached the top and enjoyed scenic panoramic views of Mayo and a great sense of accomplishment.  The sun shined down on the climbers throughout the journey with clear blue skies all around.  Everyone made it back down without any major injuries and met in the pub at the foot of Croagh Patrick to celebrate the achievement.


ITC were proud sponsors of the Young IBA Climb for the fourth consecutive year.  The event is set to raise a significant amount in aid of Saint Vincent de Paul.  Well done to all involved!

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