Personal Pension Account

Transcription

1 Personal Pension Account

2 Contents Introduction... 1 A Closer Look At Our Personal Pension Account... 2 What Are The Tax Advantages?... 3 Flexible Contribution Options... 4 You Control Your Investment... 5 Tracking Your Fund Performance... 6 Retirement Options... 7 Frequently Asked Questions... 9

3 Introduction Your pension is an essential part of your financial planning. The tax relief and long term nature of a pension make it one of the best retirement planning tools available today. If you are self-employed or not a member of an occupational pension scheme, a Personal Pension Account may be the best pension option for you. It s never too late to benefit from the tax relief Personal Pension Accounts provide generous tax incentives. Depending on your age, you may be able to contribute up to 40%* of your income** into your plan and claim full tax relief. *Based on a 60 year old. **There is a limit of 115,000 on the earnings that can qualify for tax relief. It s never too early to start making contributions Investing in a Personal Pension Account allows you to gain more control over your income when you retire and possibly retire earlier than relying on the State Pension alone. If you start making contributions early, you have a better chance to build a fund to help you to avoid a large drop in income when you retire. Could you rely on the state pension alone? The maximum State Pension (Contributory) is currently per week (January 2015), based on a single life rate. Provided you have made the required number of social insurance contributions to qualify for the State Pension (Contributory): If you were born between 1st January 1949 and 31st December 1954 inclusive, the minimum qualifying State Pension age will be 66. If you were born between 1st January 1955 and 31st December 1960 inclusive, the minimum qualifying State Pension age will be 67. If you were born on or after 1st January 1961 the minimum qualifying State Pension age will be 68. Warning: The value of your investment may go down as well as up. Warning: This fund may be affected by changes in currency exchange rates. Warning: If you invest in this fund you may lose some or all of the money you invest. Page 1

4 A Closer Look At Our Personal Pension Account A Bank of Ireland Life Personal Pension Account provides more choice and control over how to finance your retirement. There are a number of reasons to consider Bank of Ireland Life for your retirement needs. 1. A strong range of fund choice Clients have a choice of over 40 funds which provide a wide range of investment choices, diversification across geographic regions and asset classes for risk classes from low to very high. These funds are managed by a team of global and national investment managers and allow you to build a bespoke pension investment portfolio around your individual needs. 2. A specially selected default investment strategy Within our Personal Pension Account we have a specially selected default investment strategy. This aims to maximise growth in the early years, when you have more time before you retire and then move to more secure funds as you near retirement. Your contributions are automatically invested into this fund if you don t choose to invest in any of the other funds available. See page 5 for more information. 3. Access to the scale and expertise of our Fund managers * * * *Only available through our ifunds range. 4. Our commitment to keep you informed Each year (or on request) you will receive an Annual Benefit Statement outlining your current fund value. In addition, fund performance information is available on the Fund Centre. Visit fundcentre.bankofireland.com for the latest available fund information. Fund values are updated regularly. 5. Flexibility with your contributions We have designed our Personal Pension Account to allow flexibility. This means that you can change your contribution amounts should your circumstances change, throughout the life of your plan. Warning: The value of your investment may go down as well as up. Warning: If you invest in these funds you may lose some or all of the money you invest. Page 2

5 What Are The Tax Advantages? A key benefit of a Personal Pension Account is that you may qualify for tax relief on the contributions you pay into your plan. The limit on the percentage of net relevant earnings that may qualify for tax relief depends on your age. Maximum Payment You Can Claim Income Tax Relief On % of Net Relevant Earnings 40% 30% 20% 10% 0 15% Under 30 25% 20% % 35% 30% & over Your age Tax relief is not automatically granted, you must apply to and satisfy Revenue requirements. Your Insurance & Investments Manager will be able to give you information on how to claim tax relief. There is a limit on the amount of earnings that can be taken into account for tax relief on pension contributions. This is currently 115,000 (January 2015). As well as the limit on the percentage of income that qualifies for tax relief, the amount of tax relief you can claim depends on your marginal rate of income tax. If you pay 40% income tax, you pay a net payment of 60 from a monthly contribution of 100, and can claim the rest from your income tax. Monthly Contribution From your pocket From your income tax 60 Page 3

6 Flexible Contribution Options There are two things to consider when deciding on your contributions: (1) How much you want to pay; and (2) How you want to pay it. How much can you pay? You should consider what you can afford to pay. If you can take full advantage of the tax relief available, then you have the opportunity to build a larger fund for a more comfortable retirement. You can increase or decrease your contributions at any time or you can choose to increase your contributions by 5% each year to protect against inflation. Tax relief on any increase is subject to Revenue rules. How do you want to pay it? You can pay monthly, quarterly, half-yearly or yearly by direct debit. You can also make additional lump sum contributions at any time. Page 4

7 You Control Your Investment You can choose to invest in any of the broad range of funds that we have available. The funds range from very low risk to very high risk to suit different types of investors. You should think about your investment strategy before you decide what funds to invest in. Information is available on all our funds, which will help you to make the best decision for your investment. There are some key questions to ask yourself to help identify the best approach to take: When do I plan to retire? How do I feel about risk? How do I plan to take benefits at retirement? If you are due to retire soon, you may want to avoid investing in high risk funds to protect your existing fund and sacrifice any potential returns in the short term. If, however, you have a long time before retirement, high risk funds offer better potential return. There is always an element of risk with investing. The higher the risk, the greater the potential returns and vice versa. You need to consider your attitude to risk before choosing which funds to invest in. You should talk to your Insurance & Investments Manager for advice. Switching your Funds You can switch the funds you are invested in. However restrictions apply to some funds, charges may also apply. Default Investment Strategy If you don t choose a fund/funds to invest in, you will automatically be invested in IRIS (Individual Retirement Investment Strategy) which is the default investment strategy. IRIS aims to maximise growth in the early years, when you have a long time to retirement and then moves to more secure funds as you begin to approach retirement. This option may not be suitable if you want to invest in an Approved Retirement Fund (ARF) at retirement. This strategy helps protect the value of your pension pot and its purchasing power in retirement. In addition, you don t have to make any complicated decisions about what funds to invest in, or when you should switch from investing in equities to fixed interest bonds and cash. This is taken care of for you so you don t need to worry. Warning: The value of your investment may go down as well as up. Warning: If you invest in these funds you may lose some or all of the money you invest. Page 5

8 Tracking Your Fund Performance A Personal Pension Account is a unit linked pension policy. The value of your investment at a particular date can be calculated by multiplying the number of units you hold in your funds by the current price of a unit in the fund. Your annual benefit statement will give you the current value of your investment and a projection of the future value of your Personal Pension Account. This also includes details of the funds you have invested in and their current value. You can access the price of a unit in a fund through the website fundcentre.bankofireland.com and you can check fund performance at any time. Warning: The value of your investment may go down as well as up. Warning: If you invest in these funds you may lose some or all of the money you invest. Page 6

9 Retirement Options What are my options at retirement? When you retire you may have the following four options available to you: 1. Take a retirement lump sum tax free 2. Purchase an annuity (income for life) 3. Invest in an Approved Retirement Fund (ARF) / Approved Minimum Retirement Fund (AMRF). 4. Take an additional taxable lump sum. 1. Your Retirement Lump Sum The maximum amount of lump sum that you may take is 25% of the value of your fund at retirement. Up to 200,000 can be taken tax free (January 2015). The amount of money that you may take as a retirement lump sum will be subject to Revenue limits. The rest of your fund can then be used to purchase an annuity or invest in an ARF/AMRF or you can take an additional taxable lump sum, subject to restrictions. 2. Purchase an Annuity (Income for life) You can purchase an annuity which will provide you with an income for the rest of your life or an income that will continue to be paid, after your death, to your spouse/civil partner. If you choose to purchase an annuity, you may shop around at retirement and buy an annuity from any authorised annuity provider. Annuities are usually paid on a monthly basis. Page 7

10 3. Invest in an Approved Retirement Fund (ARF)/Approved Minimum Return Fund (AMRF) You can also fully or partially invest the balance of your fund in an Approved Retirement Fund (ARF) a more flexible arrangement that allows you to continue to invest in funds after retirement and withdraw money as and when you wish. To choose an ARF, you must have a guaranteed pension income of 12,700 per annum. If you don t you will have to invest 63,500 in an annuity, an Approved Minimum Retirement Fund (AMRF), or a combination of both. Any investment growth within the fund is currently tax free, however withdrawals are taxed as set out below. Required Withdrawal Please note, you are required to take a withdrawal of a certain amount each year from your ARF. This is 6% if the total ARF/Vested PRSA value exceeds 2 million. Where the total ARF/Vested PRSA value is 2 million or less, the required withdrawal is 4% p.a. if you are aged between 60 and 70 years, or 5% p.a. if you are aged 70 years or over for the full tax year. It is important to note that if a high level of withdrawals are made relative to any growth achieved there is a risk that your ARF fund could run out. All withdrawals and income payments are subject to income tax, USC and PRSI (up to age 66). Bank of Ireland Life will make the appropriate deduction and remit it to the Revenue Commissioners on your behalf. Money in an ARF can be used to buy an annuity at any time. What is an Approved Minimum Retirement Fund (AMRF)? An AMRF is similar to an ARF but there is a maximum investment amount for an AMRF, which is set by the Revenue. An individual can only ever have one AMRF. You may draw down up to 4% of the value of the assets of the AMRF each year, subject to taxation at the marginal rate. An AMRF becomes an ARF: When you reach age 75 OR If you satisfy the minimum guaranteed pension income requirement as set out by the Revenue before age 75 OR If you die before age 75 whichever event occurs first. Please note that if your AMRF becomes an ARF then the annual required withdrawal will then apply. (Please see above for further details). You must notify us in good time should this happen in order that we may deduct and pay the Revenue the correct tax. Money in an AMRF can be used to buy an annuity at any time. 4. Taking an additional, taxable lump sum At retirement, you may take an additional taxable lump sum. You will pay income tax on the amount you withdraw from your fund. Note: You have to satisfy certain conditions to avail of an ARF or an additional taxable lump sum. Warning: The value of your investment may go down as well as up. Warning: If you invest in this fund you may lose some or all of the money you invest. Page 8

11 Decide when it suits you You don t have to decide now which option suits you. You can make the decision closer to retirement. Your Insurance & Investments Manager will be able to advise you on your options. All withdrawals and income payments on ARFs are subject to income tax, Universal Social Charge (USC) and PRSI (up to age 66 only). There is a charge for the part encashment needed to get a regular income, which will be detailed in your policy conditions. We will make the appropriate deductions and remit all tax deducted to the Revenue Commissioners on your behalf. Frequently Asked Questions What happens if I die before retirement? If you die before retirement, the accumulated value of the Account will be used to provide benefits for your dependants. What happens to my fund if I die in retirement? Your annuity will continue to be paid after your death if you have opted for either of the following choices: Your annuity was guaranteed to be paid for a minimum period (of up to 10 years) and death occurred before this period elapsed. Your annuity made provision for a spouse / civil partner / dependant s pension on death to be paid. For those who choose to invest in an ARF/AMRF, the remaining value of the ARF/AMRF can pass to spouse/ dependants on your death. Depending on what option is chosen and who the benefit is paid to, tax may be payable. Warning: This product may be affected by changes in currency exchange rates. Warning: Past performance is not a reliable guide to future performance. Warning: The value of your investment may go down as well as up. Warning: If you invest in this product you may lose some or all of the money you invest. Warning: If you invest in this product you will not have any access to your money until retirement age. Terms and conditions apply. Benefits are subject to underwriting and acceptance by Bank of Ireland Life. The information contained in this document is based on our understanding of current legislation and Revenue practice as at January While great care has been taken in its preparation, this brochure is of general nature and should not be relied on in relation to a specific issue without taking financial, insurance or other professional advice. This document is for information purposes only and does not constitute an offer or recommendation to buy or sell any investment or to subscribe to any investment management or advisory service. If any conflict arises between this brochure and the Policy Conditions, the Policy Conditions will apply. Bank of Ireland Life is a trading name of New Ireland Assurance Company plc. New Ireland Assurance Company plc trading as Bank of Ireland Life is regulated by the Central Bank of Ireland. Bank of Ireland Insurance & Investments Limited is regulated by the Central Bank of Ireland. Bank of Ireland Insurance & Investments Limited is a tied agent of New Ireland Assurance Company plc. Members of Bank of Ireland Group. January 2015 Page 9

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