Meet our BOB!

ITC are delighted to announce the launch of our Buy Out Bond (BOB).

Our ITC BOB enables clients to take control of their existing employment related pension benefits and invest them in their own personally owned pension plan, to access at retirement.
 
 

It is not unusual for people to change employment many times during their career and a Buy Out Bond provides a vehicle for clients to manage their previous pension benefits and invest them in a way that suits their needs.

Our ITC BOB provides 4 key features:

• Control
• Transparency
• Flexibility
• Security

To find out more about  ITC’s BOB download our Brochure & Terms and Conditions.

 
 

 

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

Fianna Fail Launches Pension Strategy Paper

The Fianna Fail pension strategy, launched today by Willie O’Dea, deals with several issues close to our heart:

1.       The funding requirements for DB schemes

2.       The priority order for DB schemes on wind up

3.       Early Access to Pensions and

4.       The issue of Pension Charges

As chair of the Pensions Committee of the IBA I have actively involved in communicating with politicians of all shades on the issues facing pensions. The paper launched by Willie O’Dea is testament to the fact that patient and consistent dialogue does have an impact.

The funding levels DB schemes have to met is set at artificially high levels due to:

1.       the historically low level of bond yields and

2.       the additional reserve requirement imposed by the current government

The Paper proposes that this be addressed by easing the funding requirements and allowing greater flexibility as to when and if annuities are purchased.

In relation to the priority order the Paper suggests that, once a certain level of pension has been guaranteed in priority to pensioners the balance should rank equally with other members of the scheme. This would address the big gap in benefit that can exist between members either side of retirement age.

The current early access regime is too restrictive (as it only applies to AVCS) and mean spirited (as it imposes an additional 41% tax on those in difficult financial circumstances). The solution proposed is to replace it with an option to take some or all of your tax free lump sum at any stage in your life. There is no loss of tax to government and the greater flexibility enhances the attractiveness of pensions and gives relief where it is due.

On pension charges the Paper proposes the development of a Total Expense Ratio so that fund manager costs can be more easily identified. Also greater transparency on other costs is advocated.

 

To view the full paper click here.

Written by Aidan McLoughlin

Independent Trustee Company

Managing Director

Where's the money going? Part Two

In my “Where’s the money going?” Blog (Feb 14th, 2013), I mentioned the growing area of the Advisor Portfolios or Advisor Propositions.

 

To explain some of the reasons for this growth, let me go back to that period between 2007 and 2009. At the time it was estimated that 70% of pension money was held in Managed funds. A well established, general one-size fits all approach with some add-ons attached over the years i.e. Consensus and Life-styling. The strength of the Managed fund was diversification.

 

 

As we know, there’s nothing like a health scare to get a client to question his/her protection benefits. And in the same way there’s nothing like a market crash to get a client to question what went wrong?

 

 

For me some of the big questions that came from the crash about Managed Funds were:

• Did clients believe that a fund manager could switch easily to other assets?
• Were clients aware of the restrictive parameters that were set for asset allocation?
• Were clients aware of peer pressure, with fund managers constrained by benchmarking?

 

In summary - Who was managing the risk?

 

 

The realisation of the constraints of a Managed Fund, were hitting home hard. There were very few clients who had the knowledge (or interest) of how a Managed Fund operates, but the impact to their funds got them to take notice. That notice came in the form of worry, panic, anger and accusation. Not a pleasant time for all involved.

 

The response from fund managers has been to develop and promote their absolute return or risk-managed funds. A promise to focus on the risk and not just the assets.

 

The growing response from Advisors, has been to take ownership of a clients asset allocation and risk management. The availability of platforms, index funds, ETFs, bank deposits, stockbroking accounts etc. has made it easier to offer a more involved and controlled strategy.

 

Advisors who have adopted this investment model believe that this offers a more collaborative approach with clients and promotes a better client relationship.

 

The growing number of Certified Financial Planner ™ professionals and the possible move by the Central Bank to a review similar to the UK’s Retail Distribution Review, are other contributors to ITC seeing an increase in the Advisor Portfolio/Proposition approach.

 

As you know, the ITC products offer the Advisor and their clients, the structures to have choice, transparency and control.

 

 

Martin Glennon

Corporate Account Manager

Independent Trustee Company

A third of workers plan to rely solely on a state pension

In a recent survey conducted by Amarach Research, it was found that a third of workers plan to rely solely on a state pension, the Irish Independent reported today.

The state pension currently stands at just under €12,000 per annum which is about one third of the average wage (€35,849, CSO 2011). These figures mean that many people will find it almost impossible to keep up their current standard of living if they rely solely on the state. In a recent report by the IAPF it was found that there was a large gap between what people expect from the state pension and what they will receive in reality. This gap is likely to get wider.

The survey, conducted with 1,000 adults shows that only 4 out of 10 people plan to use a combination of the state pension and private retirement income. It was also found that three-quarters of people do not know how much they are paying in annual pension charges and just one in 10 shop around for pension products (Independent.ie).

The importance of private pension provision is unquestionable, relying solely on the state pension will not ensure long term financial security for most.

You can read the full article here.


Melanie Farrell
Independent Trustee Company

A diamond is forever, but what about your pension?

Any employers who are currently acting as trustee on their group pension scheme and are querying the value of appointing an independent trustee may be interested in reading the article by Tim Healy in the Independent - Ex- De Beers pension fund members are owed €50m, court hears.

This case outlines very clearly the inherent conflict of the employer trustee, particularly in a wind up situation. One of the main duties of a trustee is to act in the members best interest. It can be very difficult for a member trustee, who is employed by the company, or a company trustee who has an allegiance to the employer to separate out these roles and only act with only the members interest in mind. As can be seen in this case to do otherwise can leave the trustees open to legal action by the members. The members claim in this case is thought to be valued at €40-50 million. By appointing an independent trustee you can avoid this potential conflict.

Niamh Quirke

Technical Associate

Independent Trustee Limited

Is the State likely to provide your pension expectations?

At the recent IAPF Annual Defined Contribution Conference some of the findings of the IAPFs Financial Literacy and Pensions Research Report (April 2012) were announced.  This report revealed that almost half of all adults (47%) believe the state pension will be their main source of income in retirement. When asked how much of their current income they think they will require in retirement below were the responses.

Level of current income required in retirement	Percentage of respondents
Less than 30%	11%
31-50%	22%
51-70%	31%
More than 70%	23%
Don’t know	12%

The current state pension is just shy of €12,000 per annum or about one third of the average wage(€35,849, CSO 2011).  The findings from the IAPF report highlight the huge gap between what people expect to have in retirement and what the State will actually provide. This gap is likely to get wider with increasing pressure on the State to reduce costs. 

This means that people will either have to make a reduction in their post retirement income expectations or increase their private pension savings dramatically.

Niamh Quirke

Independent Trustee Limited

ITI Annual Conference. Fund your Bucket List with an ITC Pension

ITC were proud to sponsor the Irish Taxation Institute Annual Conference last weekend in Galway where over 370 delegates attended. Bucket List's were a hot topic throughout the Conference as we invited delegates to share their's with us in the hope of winning a New iPad. 


An ITC Pension can ensure that you make the most out of your retirement. Our bucket will be seen at many more events in the coming months so be sure to have your list at the ready. A sample of some of the  entries we received:

"To dance the Argentine Tango with Antonio Bandero"

"To become the No. 1 Formula One Driver"

"To star in a musical on the West End"

"To visit the 7 Ancient Wonders of the World"

The seminar topics ranged from a general update on the 2012 Finance Act to more specific topics such as Capital Taxes, Business Taxes and Property Taxes.

One of the more interesting topics for the delegates from ITC was the Pensions seminar. Most of the key take home points have been the subject of ITC Blogs over the last number of months, and the top five to consider are:

1. Fund to SFT as soon as possible

Individuals whose pension fund is currently less than €2.3m should consider funding their pension to €2.3m (taking account of a buffer for future investment returns within the fund up to retirement) in light of announcements to decrease tax relief on pension contributions and other potential changes that may be introduced in the future. 

2. Consider de-risking pension if close to SFT

For individuals that are close to the SFT, consideration should be given to reducing investment risk (employing a de-risked pension investment strategy – e.g. cash/bonds), with increasing urgency depending on how close one is to the SFT.

3. Critical that pension funds are monitored re SFT ceiling

Advisors should consider putting a tracking system in place to determine when an individual’s pension fund may be coming close to the SFT so that alternatives can be considered in advance.

4. Maximising lump sum at retirement remains attractive – 13% effective tax up to €575K. Tax credit up to the amount of tax paid on the lump sum is available against tax payable on any chargeable excess over SFT. 

5. Employer Pension Contributions – Incorporation of business can increase the level of pension contributions allowed and can involve family members in the business.

We will provide worked examples of these main points in the next few blog posts.

Why PRSA's are still relevant

The introduction of imputed distributions announced in November’s budget caused some concern to fans of the PRSA. The Memorandum published by the Department of Finance immediately after the Minister’s Budget speech proclaimed that income tax should now be paid on 5%/6% of PRSAs post retirement but also that the tax should be calculated on the aggregate value of all of an individual’s PRSAs once benefits were taken from just one of them. 

The proposal led some advisors to state that the PRSA was no longer a useful vehicle to hold pension benefits. The clarification provided by Finance Bill 2012 that the imputed distribution would only apply to post retirement assets brought some relief.

However, for many reasons we still see the PRSA as a useful and flexible vehicle for pension planning, even after the introduction of the imputed distribution. Here are a few reasons why:

1. There is no imputed distribution where the PRSA investor has not drawn down benefits.
2. Income from UK property held in a PRSA, as opposed to an ARF, can be taken tax-free.
3. Where no benefits have been accessed, the fund goes to the PRSA holder’s estate tax-free. In the same circumstances, benefits of an occupational pension scheme have to be spent buying an annuity for dependants.
4. The PRSA allows you to consolidate personal pensions and frozen occupational benefits and facilitates the transfer of benefits from a personal pension to an occupational pension scheme.
5. The PRSA offers statutory protection against creditors, the ARF does not.
6. The PRSA allows you to split benefits which allow significant planning opportunities.
7. A PRSA investor who is also a 20% director and who wishes to retire before Normal Retirement Age is not compelled to sell his/her shareholding of the employer company.
8. A PRSA investor can continue to contribute until age 75, no matter whether benefits are taken or not.
9. The PRSA is the most carefully regulated pension product in the country, thus meeting the demands of the ever more attentive pension client.
10. The PRSA is still the only pension vehicle which allows all types of contributors; the employed, the unemployed, those without Schedule D or E income.

We will of course continue to keep you updated with developments in the Pension’s area as the finance bill runs through the houses of the Oireachtas.


More information on ITC's PRSA here.

Trustee Training Deadline is tomorrow 1st February

As the deadline for Trustee Training is upon us, Trustee Manager, Elma Fox, discusses the last chance to comply with the deadline with Ian Guider on Newstalk's Breakfast Business.

The deadline for trustee training is tomorrow, 1st February 2012, and there is a concern that many due to complete the training are unaware of their obligations. We have developed on-line tools to help define the requirements and to complete the training. More information can be found at www.trustee.ie.

Listen to Elma's interview with Ian Guider here, at 07:56.