Pensions at Acorn Life

Pensions

Due to increased life expectancy you can look forward to spending up to a third of your life in retirement but you may not relish the idea of living on the State Pension. Pension Plans are simply a savings plans (with tax benefits) to help make your retirement years more comfortable - you invest your money into a pension, the pension grows and you use the money you have built up to keep you going when you retire.

The profile of our population is getting older, meaning less money will be available in the future, as more people will be retiring and less people working. This is why the government is actively encouraging everyone to save for their retirement by offering attractive tax benefits. Pension Plans can provide immediate tax benefits that may lower your current taxable income, and enable you to build assets free from immediate taxation. Contributions made to a retirement plan may be tax deductible - thus lowering your current taxable income.

A glossary of pension related terms may be accessed here.

Acorn Life's Pension Plan

Acorn Life's Pension Plan presents you with the opportunity to make one of the wisest investment decisions you will ever make. There is no simpler, easier or more tax-efficient way of saving money for your retirement. You can include life cover in your plan in a tax-efficient way. You can also protect your pension contributions if you cannot work.

Acorn Life's Pension Plan ensures that when retirement comes you can enjoy the benefits of financial independence. Not only that, but we have designed the plan to change as your needs change, so that you can provide adequately for your pension.

If you would like to know more about Acorn Life's Pension Plan click here.

Your Questions Answered

Here you will find the information you need about pension provision so that you can make your decision with confidence.

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What type of pension plan is most suitable for me?

The most suitable pension plan for you will depend on your employment details. There are two main kinds of pension: Personal pensions are only available to the self-employed, workers whose employer does not offer a company pension scheme for them, or workers who have decided not to join their employer's scheme. Executive (or Company) pensions are available to people whose employers have a scheme in place, or are willing to put one in place.

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What is a contribution and how much should I be contributing?

The amount you invest in your pension plan is called a contribution. Your contributions should increase each year in line with inflation to help keep your plan in line with the increasing cost of living.

StartEarlyGraphMost people underestimate how much they'll need to save to provide an adequate income when they retire. The earlier you start to save, the less money you'll have to put aside each month to reach your goal. It's never too late but it's so much easier when you start early.

Your contribution should be sufficient to enable you to retire on a total income, including state pension, of two thirds of your pre-retirement income.

If you would like to know more about what income to aim for on retirement.

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What does the Government provide?

You will get the State Contributory Old Age Pension as well as your own private pension when you retire provided you have made the required number of PRSI contributions throughout your working life. If you do not have the required number of PRSI contributions you may be entitled to an Old Age Non-Contributory Pension. This is a means-tested payment for people aged 66 or over who do not qualify for Retirement Pension or Old Age Contributory Pension based on their social insurance record. 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.

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How does Tax Relief Work?

By contributing to a pension plan you can reduce the tax you pay and instead invest it for your retirement. If you have a Personal Pension Plan you pay the full contribution and then claim back the tax relief in your annual return. If you have an Executive Pension Plan you pay the net cost from your salary and the government's tax relief automatically makes up the difference.

If you start a Personal Pension Plan, you will receive a tax certificate shortly after your plan starts, which you should send to your tax inspector. If you are self-employed, send this certificate in with your annual returns and your tax bill will be reduced for you. For Executive Pension Plans the tax relief is given to you through the PAYE system. The money going into your pension plan is never taxed as it comes from your gross salary.

Tax relief is granted on pension contributions at the top rate of income tax that applies to you. The following table illustrates the effects of tax relief on monthly contributions:


Standard Tax Rate: 20% Marginal Tax Rate: 40%
Gross monthly contribution €200 €200
Tax relief: €40 €80
Net Cost to you: €160 €120

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What are the tax relief limits for pension contributions?

The tax relief limits for Personal Executive Pension contributions are detailed in the following table:

Age attained during tax year Limit (% of Net Relevant Earnings)
Under 30 15%
30 - 39 20%
40 - 49 25%
50 - 54 30%
55 - 59 35%
60 + 40%

Net relevant earnings are subject to an earnings limit of €115,000 for the years of assessment 2015 and 2016. Your funds will accumulate free from tax on investment return until you decide to take your retirement benefits. For Personal Pensions, there is no maximum contribution that can be paid, but you may only claim tax relief within the above limits.

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What are the Government doing to help encourage private pension provision?

In the 1999, 2000 and 2011 Finance Acts the Minister for Finance made some significant changes to pension legislation which allowed self employed people and members of company (occupational) pension schemes to retain ownership of their funds when they retire.

Previously, after taking a tax free lump sum, the balance of the proceeds of personal and defined contribution pension plans had to generally be used to buy a pension for life in the form of an annuity from a life assurance company.

Now people retiring can opt to take the remainder as cash (less a tax charge) in certain circumstances, or to leave their fund invested in an Approved Retirement Fund from which they can withdraw income as they require. Approved Retirement Funds can also be used as a very tax effective means of passing wealth on within a family. The flexibility which these options provide is another big incentive for taking out a pension plan.

At retirement, part of your fund is payable free of tax and the remainder is taxed at your marginal tax rate.

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What income should I be aiming for in Retirement?

The amount of income you will need in your retirement will depend on your personal circumstances when you retire. Most people should set a minimum target of two-thirds of final income.

It is often suggested that your need for regular income will reduce on retirement. This argument is based on the assumptions that your mortgage should be paid off, your children should have left home and you will not face commuting or similar travelling expenses.

On the other hand, there will still be bills to pay. You should not be forced into a lower standard of life just because you are no longer working. Retirement means you have all the time in the world, with proper pension provision you can make the most of this time.

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What are my options in taking retirement benefits?

When you reach retirement age, you are entitled to take 25% of your pension fund as a tax free lump sum. Regarding the balance of your pension fund, three options are open to you:

  1. Buy an annuity with a life company. The annuity will provide you with an income for life
  2. The balance may be withdrawn subject to the income tax rate that applies in the year of drawdown
  3. Move the balance of your fund to an Approved Retirement Fund

However, if either option 2 or 3 is chosen, then the first €63,500 of the balance of the retirement fund must be either used to buy an annuity or invested in an Approved Minimum Retirement Fund. (i.e. a type of Approved Retirement Fund where the capital cannot be drawn down until age 75).

The individual does not have to use the first €63,500 of the fund in this way, if he or she can prove that they have other guaranteed pension/annuity income, payable for life, of €12,700 per annum or more.

If you are a member of an occupational pension scheme but are not a proprietary director, you may alternatively take a tax free lump sum that is dependent on your final salary and your years of service. If this option is taken, the remainder of your fund must generally be used to purchase an annuity.

Note: tax free lump sums are subject to a lifetime of limit of €200,000 as per the Finance Act 2011.

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10 Good Reasons for taking out an Acorn Life Personal Pension Plan

  1. You receive tax relief on your total contributions and your fund accumulates completely free of all taxes.
  2. Your fund will be expertly managed by HSBC Global Asset Management (UK), the global fund management division of HSBC Holdings plc, one of the largest financial organisations in the world.
  3. Your benefits and contributions are protected against inflation.
  4. You can make additional contributions to your fund. Additional contributions can be made either as regular or one-off additions at any time.
  5. You can transfer between funds.
  6. You can take part of your fund as a tax free lump sum. You can start your retirement by taking up to 25% of your total fund as a tax free lump sum.
  7. You can take out life cover as well as protection against being unable to keep up your contributions.
  8. You can change jobs without affecting your plan Your Personal Pension Plan is controlled by you.
  9. You have flexibility in deciding when you want to retire. You can retire anytime between age 60 and 75.
  10. Your pension is your future. Your Personal Pension Plan from Acorn Life ensures that when the time comes you can enjoy the benefits of financial independence.


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10 Good Reasons for taking out an Acorn Life Executive Pension Plan

  1. Generous tax concessions help you and your company all the way to retirement age.
  2. Your fund will be expertly managed by HSBC Global Asset Management (UK), the global fund management division of HSBC Holdings plc, one of the largest financial organisations in the world.
  3. Your benefits and contributions are protected against inflation.
  4. Your plan can change as your needs change. Apart from index linking, contributions can be increased or additional single contributions can be made to further enhance your benefits.
  5. You can transfer between funds.
  6. You can take part of your fund as a tax free lump sum. Depending on the length of service you can take up to 1.5 times your final salary as a tax free lump sum with the balance being used to provide you with a pension for life.
  7. You can take out life cover and protection against being unable to keep up contributions.
  8. You may wish to take early retirement. With the agreement of your company you can retire earlier with reduced benefits, at any time from age 50 onwards.
  9. Setting up an Executive Pension Plan is easy. The plan is set up by you and your employer completing a simple application form. The employer will act as trustee of the plan. However, for your protection the assets of the plan are completely separate from the company.
  10. Your pension is your future. Your Executive Pension Plan from Acorn Life ensures that when the time comes you can enjoy the benefits of financial independence.


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Access to this website and use of the information on it is subject to the terms and conditions outlined in our legal notice. By proceeding further you will be deemed to have understood and agreed to be bound by these terms and conditions. If this is not acceptable by you, please exit this site now. Acorn Life DAC is regulated by the Central Bank of Ireland. Acorn Life DAC is registered in Ireland, number 128945. Registered Office is St Augustine Street, Galway.

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