Hot Topic #17 : Reasons to Invest in a Pension – Part 2

Make the most of tax free savings 

You are entitled to claim generous tax relief on pension contributions. If you are a higher rate taxpayer, for every €1 you save, you can benefit from up to 40%* in tax relief. So if you make an overall monthly contribution of €100, this means it will actually only cost you €60 after tax relief. 

* Assuming higher rate tax payer (40%). It is important to note that tax relief is not automatically granted. You must apply to and satisfy Revenue requirements.

A pension can give great opportunity for growth

Getting growth on your money is important as inflation can reduce the buying power of that money over the long term. Investing your money in a pension gives you access to a wide range of investment funds which can give your money the best potential for growth over the longer term.

Up to €200,000 as a tax free retirement lump sum

On reaching retirement, you may be able to take part of your retirement fund tax free, subject to a limit of €200,000. Even where the retirement lump sum is greater than €200,000, the next €300,000 is only taxed at the standard rate (currently 20%). This very attractive benefit is not available on any other savings plan! 

Note: There is a limit on the maximum fund that can be built up on retirement. This is currently €2,000,000. This figure includes all of your pension funds, including the capital value of any retirement benefits drawn down since 7th December 2005. Where the relevant limit is exceeded, the excess in your pension funds at retirement will be liable to a once off Income Tax charge.

A wide range of Investment Funds 

You have access to a wide range of investment funds from global and specialist investment managers to suit most risk appetites including funds which are aimed specifically at providing for your retirement.

It’s never too late to start your pension.

The percentage of income that you can contribute to your pension and obtain tax relief on increases as you get older. Depending on your age, you can potentially save up to 40% of your personal income into a pension and claim full tax relief so even if you are starting your pension late, there’s still time to catch-up! You also have the option of making top up contributions to your pension (subject to Revenue rules

Feel free to contact Michael on (086) 8440541 or email us at info@mkfinancial.ie

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

Hot Topic #16 - Reasons to Invest in a Pension

Reasons to Invest in a Pension

A Pension is a smarter way to Save. If you like saving money but hate paying tax, you will love retirement savings. Unlike a deposit account where you pay DIRT on any growth, with a pension you can actually claim tax back!

Your income could drop by up to 66% in retirement 

When you retire, you’ll probably expect to maintain the same standard of living. However, unless you put a retirement plan in place, your income could drop by nearly 66% when you retire. 

The State Pension Contributory is €12,132*, but the average industrial wage is €35,874**. 

You need to save for your retirement to help avoid a big drop in income.

 * Source: Weekly State Pension Contributory 2016, www.welfare.ie. ** Source: CSO, Average weekly Industrial Wage, Earning and Labour Costs, 31 March 2014.

You may need an income for up to 30 years or more when you retire

You may be retired for up to a third of your life and that’s why it’s so important to have a savings plan that ensures that the money you earn during your working life lasts your whole life.

This means your retirement savings plan is arguably one of the most important savings plans you will ever contribute to. It can provide you with the security of a regular income to ensure a comfortable standard of living for your retirement so that you can relax and enjoy this time. 

If you do qualify for the State Pension, you could be 68 before you receive it.

The age of eligibility for the State Pension (Contributory) has changed and no longer starts at age 65. That’s potentially a three year gap in retirement income! 

• If you were born on or after 1 January 1955 the minimum qualifying State Pension age will be 67 

• If you were born on or after 1 January 1961 the minimum qualifying State Pension age will be 68.

The earlier you start contributing to your pension the better

The sooner you start your pension, the longer it has to potentially grow which could make a big difference to your retirement fund. The table shows how starting pension contributions early can have a significant impact on your retirement fund. 

Hot Topic #15 Valuable Advice is Invaluable

Valuable Advice is Invaluable

Last week we spoke about savings and investments and, with the current low rates on savings, people are looking at various investments to get a better return on their money.  This is where good financial advice becomes important if you want to make your money work for you.

There are lots of financial advisers out there, but it pays to know the different types and what exactly is offered in terms of advice.

All firms and individuals authorised to advise on investment products are registered with The Central Bank and a list of these may be found on the Central Bank website.

Tied Agents sell products from one company. They are limited in what they can advise as they can only tell you about the products they sell for their company.

Multi Agency Intermediaries can offer advice about different products from a range of selected investment firms that they have a relationship with. 

Authorised Advisors consider all the financial products that meet your needs, and act in your best interest at all times.   You will get impartial advice tailored to your needs.  You will get a document stating their terms of business which includes a list of companies they are authorised to do business with and also get a letter explaining the reason for any recommendation.

If you’re thinking of investing the most important consideration is to have the right investment time frame and the right investment risk profile. Talking to a Financial Advisor can help you decide what investment is right for you, be it a product that can offer 100% capital security or a high risk fund that can offer the potential for higher returns.

Feel free to contact Michael on 086  844 0541 or email us at info@mkfinancial.ie

Hot Topic #14

Why Invest?

At the moment the returns on savings are disappointing and if you have some money saved you may be considering investing it to get a better return.  

For people considering investing money over the medium to long term, typically, it’s because they want their money to grow. They are looking for better growth potential than what deposit accounts can offer at the moment.

How can you make the most of your money? 

It is widely acknowledged that one of the best ways to increase the value of money over the medium to longer term is to invest in assets such as shares and property. 

History has shown that investments in these types of assets offer one of the best opportunities to beat both inflation and deposit rates and to grow your money. 

However, investments in these assets can be risky as the value of these assets can rise and fall over time. Sometimes, particularly over short timeframes, these can experience significant changes in their value. 

• There are many ways to invest - ways that suit you, your goals and most importantly your attitude to risk.

• If you thinking of investing why not call us and see how we can help you make the most of your money

Feel free to contact Michael on (086) 8440541 or email us at info@mkfinancial.ie

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

Hot Topic #13

Every time you move job, there is a chance you’ve left a pension behind!

Do you know where all the pieces of your Retirement picture are?

These days people move jobs more often than before.  As a result there is an increased chance of having multiple pension plans in occupational pension schemes of former employers that need to be managed to provide for the retirement you picture for yourself.

If you’ve ever paid into any of the following, you may be entitled to take some of the benefits …

·         • Private Pension

·         • PRSA

·         • Company Pension

If you moved employment and changed address, your previous employer may still have your old address and pension correspondence may not be reaching you. 

MK Financial are available to help you to carry out a thorough review of your previous pensions and current pension arrangements to make sure you are taking all the best steps to provide for your retirement.

Feel free to contact Michael on 086 844 0541 or email us at info@mkfinancial.ie

Hot Topic #12 :The Cost of Education in Ireland

The Cost of Education in Ireland

We all want to give our children the best possible start in life and a good education is a top priority. However, this can be a lot more costly than you might realise.

The cost of putting just one child through school can easily run into tens of thousands of euro. If you have two or more children then you're going to have to dig even deeper to keep the educational roadshow up and running.

Latest research has revealed the cost of educating your children in Ireland, from your nervous goodbyes on their first day in primary school right through to your gushing pride on their college graduation day. Here's the breakdown of what you can expect to spend throughout your child's school years

Primary School Education

It all starts here; your child's first days at school are a big milestone. Their first day at school is also your first day of many years of (very worthwhile) expense and investment.

The average cost of sending a child to primary school each year is €490, with uniforms and books being the most substantial expenses. Capitation grants paid to primary and post primary schools have been reduced in recent years and parents have seen this reflected in the increased voluntary contributions they are asked to pay, now €90 on average in primary schools.

The total cost of 8 years' primary school education comes in at an estimated €4,000.

Annual cost €490;     Lifetime cost €3,920 (Source Barnardo’s School Costs survey 2015)

Secondary School Education

The cost of education gets even higher as your child moves into secondary school. The average annual cost of education for a child entering first year is €1,135. School books and transport are among the most sizeable expenses.

The move to secondary school also brings a greater number of 'other' expenses such as lunch money, sports gear, school trips and class essentials like ingredients for Home Economics or T-Squares for Technical Graphics.

If we allow for the fact that the bulk of school books will be bought in first and fifth year in the build-up to junior cert and leaving cert cycles respectively, the total cost of 6 years' secondary school education, extra expenses excluded is estimated to be €5,500.

Annual Cost €1,135;   Lifetime cost €5,510 (Source Barnardo’s School Costs survey 2015)

Third-Level Education

Whilst the average cost of sending a child to primary school and secondary school may seem excessive, the expense associated with third-level education leaves both in the ha'penny place. All "free-fees" third level institutions charge a mandatory student contribution of €3,000 per year for 2015/16 with no sign of easing in the medium-term.

Unfortunately, this student contribution is just one of the costs likely to be incurred when putting your child through third-level education, although they may well be able to help out with tuition fees by undertaking some part-time work by this stage; at least to cover some of the costs associated with their blossoming social lives!

Living at Home     Annual cost €3,495;  Lifetime cost €12,495

Living Away          Annual cost €6,726;  Lifetime cost €24,906

(Source:  DIT Student Cost of Living guide 2014/2015)

Given these figures, we estimate the minimum cost of education for children in Ireland from primary school to college graduation is €34,000*.

*Source Zurich Life based on data published in 2014/15

Don't leave it too late to plan!

Hot Topic #11: Annuities - update 11th May

Annuities

If you are at the stage in your life when you are thinking about retirement, or reducing your hours at work, you might want to consider how you can get more money from your pension. 

Why an annuity?

When you reach that stage in life when you want to start drawing on the money you’ve saved in your pension fund, a typical way to do this is to buy an annuity with money from your pension fund. An annuity provides you with a regular income for life, no matter how long you live.

When you are buying your annuity, you will normally be entitled to take a part of your pension fund as a tax-free cash lump sum. The remainder of your fund can then be used to buy an annuity. Alternatively, you can use your entire pension fund to buy your annuity.

There are a number of factors that will determine the amount of the annuity you are entitled to receive such as 

• age {50 to 80}, 

• have a qualifying medical condition, 

• are taking regular medication, 

• are overweight, 

• and / or are a smoker. 

This income may be higher than the income you could receive from a standard annuity.

Choosing the right option to provide an income for the rest of their life is a big decision. You don’t have to buy your annuity from the same company your pension is with so you are free to shop around and find the best policy and provider for You.

Shop around for the best deal.

 If you were buying a new house or car, it’s more than likely you would have a good look around the market to find what suits you and offers the best deal. You should do exactly the same when you start thinking about your income in retirement. This money is going to see you through the rest of your life, so it’s a big decision. It’s important to shop around because different companies will offer different rates for retirement income. The money from your pension fund has to stretch over a long time. Because of that, even the smallest difference in annuity rates can affect your pension income by hundreds of euros a year for the rest of your life. Compare quotes from different companies 

Your pension provider will offer you a rate for your pension income, through an annuity. Remember that you don’t have to take the first deal you’re offered. Your pension plan will likely include an open market option, which means you can shop around, looking at deals from other companies. Take some time with your Financial Adviser to get quotes from a number of companies and compare them against each other.

How much income will you receive? 

This question can only be answered when the Company have received certain information that they will use to calculate how much pension income you will receive. As the level of pension income you may get depends on your personal circumstances, it can vary from one person to the next.

They will look at all sorts of things to work out your pension income, including:

› The size of your pension fund 

› The annuity rates at that time

› Your age 

› Your health (if you’re applying for an enhanced annuity) 

› Whether you want to add your spouse/civil partner

› Your spouse/civil partner’s age