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By 2016 there will be more than 625,000 over the age of 65, which is an 80pc increase on 1991. And by 2016 there will be over 800,000 in the 50 to 65 age bracket.

In other words, thousands of us are going to retire in the next 20 years and many will enjoy up to half a working life in retirement.

Therefore, the decisions we make both coming up to retirement and at retirement are vitally important if we are to enjoy a comfortable standard of living in our later years.

Retiring in this country was a lot simpler in our grandparents' time.

Most simply worked until the age of 65 and then claimed the State pension, contributory if they had paid PRSI (pay related social insurance) and non-contributory if they had not.

Now a large portion of the working population are members of pension schemes which brings with it a degree of complexity when choosing the most appropriate retirement options.

Successive governments have, through legislative changes, made retiring a much more cumbersome process.

Firstly, we no longer receive the social welfare pension until 66 and this will soon move to 67 and later 68 and have little doubt at some stage in the future, it will be 70.

However, most of our employment contracts have us ceasing work at 65.

Therefore, for many retiring we will be waiting two to three years to receive our State pension which in many private schemes was included as part of the overall benefit.

This means that at 65 we will only be receiving a portion of what we originally understood to be our replacement income.

However, this is only the beginning of the complexity when we start looking forward to a quieter pace of life.

For those in the public sector life will be a lot simpler.

After 40 years' service they receive a gratuity of one-and-a-half times their salary and an income for life protected from the ravages of inflation of 50pc their pre-retirement income.

For those in private sector defined benefit schemes that are adequately funded, retirement benefits of two thirds final salary can be paid.

Those however in defined contribution plans have it far more complicated.

Firstly, they are not sure of what their retirement income will be until they actually retire.

At that stage they have available to them a fund of which they may take some tax free and the remaining fund can be used to purchase an annuity or an income for life.

Alternatively, they may decide against purchasing an income and instead invest the balance in an Approved Minimum Retirement Fund (AMRF) or an Approved Retirement Fund (ARF).

Which option is chosen depends on the income of the retiree from other sources including the State pension, and if it is above €12,700 the option is between an annuity and an ARF.

This is where the importance of independent professional advice is vital as the decision made impacts on the financial future security of an individual for a significant period of time.

The decision made will depend on many factors and should be carefully considered. For example, the annuity guarantees an income stream for life.

However, it is a once-in-a-lifetime purchase and subject to the annuity rate (interest rate) on the day of purchase.

For example, we are living in a near zero-rate interest environment with rates likely to stay low for the foreseeable future. This has a direct correlation to the amount of pension a person can purchase.

The ARF option allows the remaining fund to be invested and drawn down when required. It will however, like a pension, be subject to tax and to ensure the Government gets paid they require a 4pc drawdown annually.

Retirement is best enjoyed financially secure and the decisions made have long-term consequences, and cannot be taken lightly. Proper advice from a qualified financial adviser, a broker, like Atlantic Financial Services, is a prerequisite.

 

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testimonial"We approached Terry at Atlantic Financial Services about our company pension scheme a number of years ago and he provided a much improved offer for our employees. The complex area of pensions was and continues to be clearly explained to all involved. We would highly recommend the service and attention to detail we received."

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