Age 60+

Now is the time to maximise your tax break and continue to build your retirement fund.

How much do I need to invest?

How much do I need to invest?

retirement-option-pictureYou are now about six years from retirement so it is important to plan your investment strategy and have a realistic view of the value of your fund when you reach retirement age.  Your retirement age can be anytime after age 60 (subject to scheme rules).

How much tax relief do I get on each contribution invested?

The taxman is willing to give a helping hand and will give you income tax relief at your marginal rate on up to 40% of your net relevant earnings. That is a very attractive incentive particurarly if you are a higher rate tax payer which is 41%.

Lets look at those figures for a high rate tax payer who contributes €10,000 to their pension fund. They will get tax relief of €4,100.  The net cost is €5,900 (correct May 2013 and may be sumbect to change in tax rules).  The calculation for a standard rate tax payer  is a net cost of €8,000 for an investment of €10,000.

Therefore you should maximise your tax break opportunity in the years leading up to retirement.

Because pensions are designed specifically for retirement, they offer a number of advantages that other savings plans don’t.

  • The money you pay in benefits from tax relief.
  • Your money grows in a tax efficient way as no capital gains tax applied to growth.

We’ve based these details on our understanding of current taxation law and practice. They might be affected by any future changes in legislation.

When can I access State Pension?

The age for accessing the State Pension is increasing as follows:

  • 1st January 2014 – State Pension age is 66
  • 1st January 2021 – State Pension age is 67

Checklist - it important to collect all the relevant information.

  • Request up-to-date statements for your personal and company pensions including your AVC’s.
  • You may need to write to previous employers to enquire about retained pension benefits.
  • Write to the Department of Family & Social Protection to establish your State pension entitlement.
  • Gauge how much money you will require to support your retirement.
  • Seek advice if there’s a significant shortfall as delaying or phasing retirement could be an option.
  • De-risk your investments to protect your pension from downturns in the stock market. It is vital that you understand the amount of investment risk you are currently taking and the investment options available to you.
  • Boost your pension by increasing your contributions and/or adding lump sum payments.
  • Think about the tax free payment you may be entitled to and whether you want to take your pension as an annuity or through income drawdown.
  • If you want to take an annuity, decide which type.  An annuity can, for example, increase by a set percentage, be linked to the rate of inflation or provide a spouses pension.
  • Consider whether you want to take 25% of your pension pot as a tax-free lump sum – and think about how you might use this money and the choices available for the remainder of your fund. If you choose 25% of the fund then the balance is invested in an Approved Retirement Fund – subject to conditions.
  • Write a Will or review any existing Will you have in place
  • Check what will happen to your pension on death.
  • Assess the value of your estate for inheritance tax purposes and consider ways to reduce your liability.

For advice on planning for your retirement: Contact Future