Are all of your pension eggs in one basket?
Maybe this year you shouldn’t make an additional contribution to your current pension plan.
October is the month in which most self-employed people and company directors consider their pensions. Those who are in a position to do so will make an additional contribution and help to minimize their tax bill while providing for the future. The problem is automatically topping up an existing pension policy may not be the best course of action.
If all of your pension assets are in one policy, then you have to retire that policy in one go. If you had multiple policies, you could retire them as you need the benefits. You could be working part-time so would not need your full pension. There are significant advantages in the multi policy strategy for those who plan ahead. Rather than accumulating all pension funds in one plan choose instead to have 2 or more pension policies. Splitting an existing large pension can be done once it has not been retired and here are the advantages of this approach:
The more assets you already have invested the more beneficial this approach will be for you.
This October don’t automatically top up your pension as you may have done in previous years. Set aside some time to look at your situation. Ensure that you have made a plan that you can stick to in order to deliver the retirement that you want. Always get Independent Fee based Advice. It never hurts to get a second opinion if you are not sure what you are being told, and it can make a huge difference to your retirement by shopping around. Costs have come down a lot and some older pension policies really should be scrapped. High costs and in some cases limited choice do not have to be accepted.
Ends
Author: Oisin Humphreys is a Financial Adviser at MyAdviser.ie, holds QFA and MSc. (Mgmt.). MyAdviser has been providing independent financial advice for 15 years. If you have any questions Direct: 021 601 0750 Mobile: 087 240 5500 E: oisin@myadviser.ie
Main: 01-90 10 464 or E: info@myadviser.ie.
MyAdviser specialises in lifestyle financial planning and serves clients across Ireland. Existing Advisory Clients can contact us with any questions regarding this information or any other issue in their lives. We are here to help and want to make sure that any concern is dealt with.
October is the month in which most self-employed people and company directors consider their pensions. Those who are in a position to do so will make an additional contribution and help to minimize their tax bill while providing for the future. The problem is automatically topping up an existing pension policy may not be the best course of action.
If all of your pension assets are in one policy, then you have to retire that policy in one go. If you had multiple policies, you could retire them as you need the benefits. You could be working part-time so would not need your full pension. There are significant advantages in the multi policy strategy for those who plan ahead. Rather than accumulating all pension funds in one plan choose instead to have 2 or more pension policies. Splitting an existing large pension can be done once it has not been retired and here are the advantages of this approach:
- Flexibility regarding the timing of drawdown of the benefits, including tax free cash. By separating out your pension assets into separate policies you can take benefits as you need them – up to age 75 after which all benefits must be taken.
- The assets left in the pensions or PRSA’s grow tax free and you do not have to take any income from them, unlike Approved Retirement Fund (ARF).
- You avoid having a large lump sum that needs to be invested and growth taxed at 33% OR 41% on any growth.
- If the you died in retirement and still had assets in the PRSA or Personal Pension then the pension assets can be inherited by your estate, with all or most of it tax free. This is not the case after the policy has been retired. As much as 30% income tax can be taken from assets inherited by your children from an ARF.
- Additional investment diversification can be achieved – you can have more than one pension manager lowering your provider and investment risk.
- You can take advantage of the best deals and get more invested in your pension rather than just taking what your existing provider offers.
The more assets you already have invested the more beneficial this approach will be for you.
This October don’t automatically top up your pension as you may have done in previous years. Set aside some time to look at your situation. Ensure that you have made a plan that you can stick to in order to deliver the retirement that you want. Always get Independent Fee based Advice. It never hurts to get a second opinion if you are not sure what you are being told, and it can make a huge difference to your retirement by shopping around. Costs have come down a lot and some older pension policies really should be scrapped. High costs and in some cases limited choice do not have to be accepted.
Ends
Author: Oisin Humphreys is a Financial Adviser at MyAdviser.ie, holds QFA and MSc. (Mgmt.). MyAdviser has been providing independent financial advice for 15 years. If you have any questions Direct: 021 601 0750 Mobile: 087 240 5500 E: oisin@myadviser.ie
Main: 01-90 10 464 or E: info@myadviser.ie.
MyAdviser specialises in lifestyle financial planning and serves clients across Ireland. Existing Advisory Clients can contact us with any questions regarding this information or any other issue in their lives. We are here to help and want to make sure that any concern is dealt with.