Dail Drawdown

Yield from the taxation of the annual imputed distribution of ARF assets 2007 – 2012

Year	Yield (€ million)
2007 (earliest available)	2.75
2008	6.5
2009	7.9
2010	10.3
2011	11.6
2012	11.5

ITC win at the YIBA Awards!

The Young IBA awards took place yesterday in The Round Room, Mansion House as part of the 2013 Annual IBA Lunch.  We are delighted to announce that Colin O'Neill of ITC took home the prestigious Judges Choice Award.

Colin joined Independent Trustee Company in 2008 and holds the position of assistant client services manager.  He is responsible for the administration of our products and services for a portfolio of clients.  This involves daily interaction with our clients and their advisors. He obtained a Bachelor of Science in Finance from University College of Cork in 2006.  Colin went on to become a Qualified Financial Advisor in 2009.  Most recently, Colin qualified as a Chartered Institute of Management Accountant (CIMA) in August 2013 where he came 4th in Ireland in his final paper.

The management and staff in ITC would like to take this opportunity to congratulate Colin on his award and are delighted that his hard work has been acknowledged by the Young IBA.

Colin O'Neill is pictured below with Des Cahill and Aidan McLoughlin, Managing Director of ITC Group.

ITC Budget 2014 Webinar Recording

If you missed this mornings ITC Budget 2014 Briefing webinar in association with the Irish Brokers Association you can view the webinar recording here.

We hope that you find the presentation useful in your planning for 2014. If you have any questions in relation to the content discussed please e-mail JustAsk@independent-trustee.com. 

www.independent-trustee.com

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.

What is the Value of a Promise?

 

It is estimated that 90% of defined benefit schemes in Ireland are in deficit and that the pension schemes of 200,000 individuals are in danger of collapse with the new rules regarding funding requirements.  You will most likely see more of your clients coming to you asking what to do next.

The defined benefit scheme was the holy grail of pension schemes for a long time.  You were guaranteed a certain level of pension in retirement based on your years of service and salary.  What you effectively have is a promise and now you must ask yourself what value you can put on a promise from a scheme which is in deficit.  When advising clients who are considering exiting a defined benefit scheme, you must take particular care.  The client is considering giving up what could be a very valuable benefit, if the scheme can deliver on the promise.  However, if there are doubts as to the ability of the scheme to deliver or even survive, you would need to consider whether the client would be better off taking a transfer value now and putting those funds to work for them.

When an individual ceases employment or leaves a company pension scheme, or the company pension scheme is wound up, there are a number of options available to them.  Taking the transfer value to a buy out bond is becoming increasingly popular among clients.  The trustees of the existing company pension scheme will establish a buy out bond in the individual’s name and transfer the value of their benefits to the bond.  The aim is to put the individual in control of their pension benefits.  The buy out bond has fewer restrictions with regards to investments and often more favourable costs than a PRSA.  The buy out bond can also provide greater flexibility when accessing benefits. 

Independent Trustee Company has recently launched their new Buy Out Bond.  To find out more about  ITC’s BOB download our Brochure & Terms and Conditions.

Written by Jennie Faughnan

ITC Consulting

For further information contact our team to discuss:

Michael Keyes (01) 614 8045 / michael.keyes@independent-trustee.com

Sean Mc Loughlin (01) 614 9220 / sean.mcloughlin@independent-trustee.com

Martin Glennon (01) 603 5130 / martin.glennon@independent-trustee.com

www.independent-trustee.com

Finance Act 2013 – the Bill

The Government published Finance Bill 2013 on 13^th February 2013.

In the area of pensions, the Government introduces new thresholds to the regime for ARFs and vested PRSAs. The measures are significant because they contravene previously introduced efforts at securing pensioners’ retirement income in old age.   The new thresholds, which had not been flagged by the Minister in his Budget speech in December, means that the thresholds which applied to ARFs pre-Finance Act 2011 will now see a comeback.

Since Finance Act 2011, members of Occupational Pension Schemes and contributors to Personal Pensions and PRSAs who have an annual pension income of €18,000 can take the entirety of their pension benefits into an ARF.  Those who do not have sufficient pension income must first set aside pension benefits to the value of €119,800 in an AMRF - or buy an annuity for that amount. The AMRF has to be kept until age 75, or until such times as the pensioner becomes entitled to an annual pension income of €18,000 (whichever is the earlier).

However, from the passing of the Finance Act, the requirement of a €18,000 pension income will be reduced to €12,700. This means that recipients of the Old Age Pension (currently around €12,000) who have very limited additional pension income, no longer have to put money aside for very old age. Accordingly, Finance Act 2013 effectively marks the beginning of the end for the prudence of thinking which infused the AMRF concept.

Furthermore, from the date of the passing of the Finance Act, the max value of the AMRF will be reduced from €119,800 to €63,500.  But it is perhaps more precise to say that the value of ARFs will be increased by the difference, namely €56,300. This is significant because ARFs are subject to imputed distributions which, in turn, are subject to income tax - while AMRFs are not. So, bigger ARFs, bigger income for the Exchequer. While there can be no other reason for decreasing the value of the AMRF other than to improve the tax take for the Exchequer, the measure is, seen in isolation,  perhaps of little importance as the AMRF regime is on the way out – as already argued.

Another measure, one which was flagged in the Budget, is the access to AVCs prior to retirement in certain circumstances.  An individual who has made AVCs can make a once-off withdrawal of up to 30% of the value of their AVCs prior to reaching retirement.  This is restricted to AVC funds. Access to other types of pension arrangements, such as personal pensions, is not available.  The access to AVCs will be available for a period of 3 years from the passing of the Finance Act 2013.

Funds withdrawn in this manner will be subject to income tax at 41% but will be exempt from USC and PRSI.  If an individual can provide a certificate of tax credits or evidence that they are subject to income tax at the 20% rate, the tax payable may be less than 41%.

While this would appear to be a welcome measure at first glance, on reflection it could once again signal the government’s shift to short-sighted policies to increase the short term tax take from pension funds.  As with the changes to the AMRF regime, allowing early access to AVCs only serves to reduce the benefits available to fund an individual’s retirement which may once again leave them dependant on the State later in life.

 

Tommy Nielsen & Jennie Faughnan

Independent Trustee Company

Dáil Drawdown

Dáil Drawdown is a new edition to our blog and brings you recent pension news straight from the Dáil Chamber. Here is our first installment.

Source: www.oireachtas.ie