Getting Ready to Retire

Getting “Retirement Ready”
It’s more than just financial preparation.

Mention retirement planning and more often than not, people’s thoughts turn straight to financial planning and pension provision. Scratch the surface, however, and people’s concerns can run a little deeper than financial fears. There is more to consider as we embark on this transitional life stage than counting one’s pennies. Yet, this is generally the area where employers feel most obliged to support their staff.

ARFs Annuities

The reality is that retirement – as with all transitions in life – can be a time of great upheaval emotionally, psychologically and physically. For that reason, it is equally as important for people to consider the non-financial implications of their move from the workplace into the new life stage of retirement.

A survey published by the Retirement Planning Council of Ireland in November 2014 indicated that half of people approaching retirement did not feel ready to retire. Feelings of apprehension, worry and concern were dominant despite the fact that more than two-thirds of the same group have some kind of financial provision in place and believe they will be financially secure when they retire. This implies that something else beyond financial planning is at play, causing feelings of uneasiness.

Our wellbeing at any stage in life is dependent on balancing three elements – prosperity or finance, health and happiness. When we retire we undergo a transition process through which almost every aspect of our life will change, regardless of career history or professional background. This can have a major impact on our happiness levels. Our daily routine, the amount of spare time we have, our social networks and personal relationships will all shift dramatically. Our role in society, the status that often goes along with that role and the way that might have shaped our personal identity can also be affected. As we grow older we also need to focus more upon our health and how we manage it. Failure to recognise these lifestyle changes – let alone plan for them – can lead to a very difficult existence.

Encouragingly, the same Retirement Planning Council research has also highlighted that once people had taken the time to consider the lifestyle changes ahead and understand how they might deal with them, they felt significantly more upbeat about their retirement. A remarkable 95% of people felt excited, positive and optimistic about their retirement upon completion of a retirement planning course focusing on the psychological, physical and financial elements of retirement.

Undeniably, financial preparation for retirement is vital but without consideration for the lifestyle shift, many people will struggle to adapt to their new way of life. Tending to the psychological portfolio is equally as important as building the financial one and giving some serious time and thought to preparing oneself will go a long way to smoothing the transition into this new life stage.
Elizabeth Carvill is Head of Development at the Retirement Planning Council of Ireland, an independent not-for-profit organisation working with more than 400 organisations to support their staff as they approach retirement by delivering a range of practical pre-retirement courses. See for more information

77% will not have enough money in retirement

Although as a nation Ireland is not engaged in adequate financial planning for retirement, we are very open to it and we recognise that in the face of an ageing population a compulsory option might now be needed.

This is according to findings from a recent nationwide survey commissioned by the IAPF which revealed that 77% of respondents believe they are not saving enough for a reasonable standard of living in retirement – with 23% saying they are not saving anything at all.

Speaking at IAPF’s annual Defined Contribution conference this morning (Thursday) Jerry Moriarty, its CEO of gave his thoughts on the results, “The pensions sector and the Government know that we are facing a major national problem when it comes to pensions – outside of employer schemes, people are simply not saving enough – if at all. So the results of the survey, while worrying, are not surprising. More importantly they reinforce the urgent need to develop and implement a long-term pension policy.

However, what we believe to be the most revealing element of the survey is that 70% of people say that they would be in favour of the Government introducing a type of mandatory pension scheme to encourage more people to save for their retirement. So in fact, the Irish public do recognise that there is insufficient retirement planning taking place, and they are cognisant of the fact that something more drastic than just encouraging people to save into a pension may need to be done. The percentage support for the Government’s plan is even higher amongst older people (55+) at 80% – many of these respondents are already retired and so have a better understanding of exactly how much people in retirement need to live on”.

Jerry continued, “The only way in which we can tackle the pension crisis is by engaging with the people that are most affected – those workers with little or no pension provision. Ultimately, we need “buy-in” from this group. So it bodes well for the Government’s plans to introduce some form of compulsory pension scheme that the majority are open to this initiative”.

The IAPF survey revealed that men and women have pretty much the same opinions when it comes to whether or not they are saving enough for retirement. However, people in different age brackets seem to vary in opinion.

Jerry explained, “Worryingly the lowest % of people who feel they will have enough for a reasonable standard of living in retirement are in the 35-54 age group at just 20%. Not surprisingly, this is the same group whose relatively wealth was most impacted by recession.  A higher percentage of those over 55 believe they will have reasonable standard of living in retirement, but it’s still disappointing at 31%. Clearly there’s a massive divergence between our aspiration for an enjoyable retirement and our actions through our working life to make it happen.”

When asked “Do you believe that you or your employer are saving enough to give you a reasonable standard of living in retirement? 
Respondents answered as follows:

 Pension survey

Jerry went on to say, “Broadly speaking most of the people surveyed are open to the suggestion of a mandatory pension scheme, but middle aged adults (35-54) appear to be slightly more reticent about it – this might be to do with the fact that they could be the group who are most financially stressed at this point in time – many/ most with mortgages and possibly dependent children”.
When asked “Would you be in favour of the Government introducing a type of mandatory pension scheme to encourage more people to save for their retirement?

Respondents answered:

pension survey

Jerry concluded, “In February of this year the Tánaiste announced the establishment of a new Universal Retirement Savings Group to “develop a roadmap and timeline” for the introduction of a new universal supplementary retirement savings scheme – our survey results hammer home the real need for such an initiative sooner rather than later, and in a pre-election year the Minister and the Government alike should capitalise on the widespread support this survey reveals.

The crux of the matter is that the Government needs more action and less rhetoric – at this point it is important that we don’t just add to the many previous reports and recommendations that have not been implemented”.





Press Release14.05.2015


Income Protection – the important cog in your financial wheel

We all fund our lifestyle by spending our hard-earned income. This income is used to feed ourselves, to pay mortgages, to pay all the bills and to fund our lifestyles; new clothes, nights out and holidays etc. Our income is also used to pay our insurance premiums and hopefully to pay towards retirement planning! So what happens if we get sick or have an accident and this income stops? This is where income protection insurance comes in. A previous term used for this cover was Permanent Health Insurance(PHI).


What is income protection?
Income protection insurance is a product that in the event of you being unable to work due to illness or accident, the insurer will pay you a replacement income until your retirement date. Most Financial Brokers recognise the importance of maintaining an income and recommend to clients that they have adequate replacement income in place, should they be unable to work. For some lucky few individuals, their employer provides this salary protection cover. For most, they may end up reliant on modest state benefits. Indeed for the self-employed, they are entitled to nothing and as a result they really need to get their own income protection insurance in place.


Is income protection the same as payment protection on a mortgage or other loan
In a word, no. They are not the same product. Payment protection is a product that was predominately offered by banks to cover repayments on a mortgage or loan. However this cover usually only lasted for a year or so and had quite strict conditions attached. In fact payment protection insurance has a very chequered history and indeed was sold to people who often would never be eligible to claim. You may often see in the media thatbanks are now being forced to refund customers for payment protection policies that were mis-sold in the past.


Income protection is completely different. It covers your income in the event of illness or accident and the benefit is payable until you recover and are able to work again. If you don’t recover, it is payable until you reach your retirement age. In fact the state are supportive of people taking out income protection insurance. You get full tax relief at your highest income tax rate on the premiums you pay. Now this is one of very few ways left to get marginal rate tax relief on anything!


How much does it cost?
Like most products, it depends. The premium that you pay will depend on a range of factors such as;
• Your age
• Your occupation
• Amount of cover needed
• Your state of health
• Your choices in relation to a range of policy features

Where do you start? The best way to proceed is to contact your Financial Broker who will explain all of the options available and will prepare an income protection quote for you. And because your Financial Broker is impartial and deals with all of the product providers, they will find the best product for you at the lowest price available. You can then rest easy, knowing that at least your income is secure.


The case for mandatory pension schemes

In a recent survey conducted by the IAPF and iReach, it emerged that only half of those working are participating in a pension scheme. While older survey respondents showed a much stronger awareness about pensions, a huge 80% of those under 35 did not know how much (or how little) one receives from the State pension. While this is not altogether surprising, at what point does the awareness around pensions kick in, and at that point is it too late to start a realistic provision for retirement? Is it time to introduce a mandatory pension plan?


The Government has come up with a name for a new mandatory occupational pension but has not given any date for its implementation. The new MySaver scheme is designed for those without any pension in place other than the state pension, Minister for Social Protection Joan Burton said.

The Small Firms Association has signalled its opposition to the idea of a mandatory pension scheme for Irish workers.

In its submission to the Universal Retirement Savings Group, which is examining the issue on behalf of the Department of Social Protection, the SFA says mandatory pension provision will prove costly to employees, to business and the state, without any associated benefits in the long term.

Patricia Callan, director of the Small Firms Association, says the fundamental reason the SFA is opposed to the idea is that not enough work has been done to promote the voluntary approach to pension provision. Ms Callan says the SFA is also very concerned about any increase in the cost of employment, particularly at this time when small businesses are just about getting back on their feet. She says that many SMEs are not even engaged in the concept of pay increases as yet. A mandatory pension scheme would be an extra cost for SMEs because in any such scheme there is always an employer’s contribution as well as an employee’s contribution – which by and large comes back on an employer in the form of a pay claim – and an Exchequer contribution, which is funded by both employees and employers.

Ms Callan also says that a call for a mandatory pension scheme is an “over-reaction” as Ireland has a much younger population that the rest of the EU, which is following this mandatory trend and the economy has a lot of other measures which could be implemented to solve the pension crisis. She adds, however, that the Association does accept that a crisis does exist in the pension system.

The SFA director says that if there was more of a focus on getting people into work, on creating a better and more dynamic economy, then a pension crisis will not arise as the country will be able to fund a pension scheme better. “In particular, in terms of trying to persuade people that private pensions are the best way to go, we need better products, less charges and a much more guaranteed sense of return,” Ms Callan says.


Protection cover for cohabiting couples

Assets passing on death between married couples or civil partners are exempt from Inheritance Tax. BUT this only applies in the case of ‘legal spouses’ and same sex registered civil partners. All other couples are treated as strangers for Inheritance Tax purposes. The stranger threshold for Inheritance Tax is currently €15,075. Inheritances in excess of €15,075 are subject to tax at 33%.

Will you have to pay inheritance tax on the death of your partner? On the death of a non married partner Inheritance Tax will be payable on the total value of all assets, regardless of how long the couple have lived together. With the possible exception of the family home, where a ‘cohabiting partner’ inherits other property, or a death benefit under an insurance plan, the €15,075 threshold could easily be exceeded.

inheritence tax

If you think this affects you I would invite you to contact me with a view to reviewing your family and mortgage protection arrangements to ensure that you and your family receive the proceeds of your life assurance plan when you need it most in the most tax efficient way possible.

Summary of Finance Bill 2014 and impact on Pensions

ARF Imputed Distribution rate reduced

We welcome the reduction in the Imputed Distribution rate for ARFs and Vested-PRSA-ARFs (up to €2m) from 5% down to 4% between the ages of 60 and 70. The purpose of the change is to reduce the risk that ARF owners will outlive their retirement funds (by reducing the possibility of the fund running out). However, it is a pity that the age limit of 70 applies, and the Imputed Distribution Rate reverts back to 5% thereafter.

Withdrawals from AMRF now permitted but…

For the first time, new provisions will allow a maximum annual withdrawal of 4% (subject to taxation) from an AMRF (but not, it appears, from Vested-PRSAAMRFs). However, after 1 January 2015, it will NO LONGER be possible to withdraw income or gains made by an AMRF in excess of 4%, so AMRF-holders wishing to access fund growth from their AMRF in the near future should consider withdrawing these gains before 31 December 2014. Otherwise future withdrawals from the AMRF will be limited to 4% (under the current proposals).

Pension Levy is no more!

The good news for pension clients is that the Budget and Finance Bill has given certainty that the Pensions Levy will be ceasing after 2015 and customers have a “Green Light” to continue contributing to their pension and receive tax relief as before. Their pension continues to be the most tax-efficient way of saving for their retirement.

Good Advice is a Great investment

Professional independent financial advice is valuable and worthwhile.  Recent research* shows that those who have consulted a financial adviser have 80% more in savings and investments, are nearly twice as likely to hold a pension and feel more financially confident about the future.

The financial services market has been undergoing a transformation.  Advisers are exploring how advice is delivered and how clients value and pay for it.  They are investing in higher qualifications and are examining how they run their own business to develop a more transparent and flexible structure. Financial advice is becoming much more strategic.  Advisers help their clients develop long-term plans that focus on their lifetime goals, such as saving for retirement or building a college fund for their children.  Professional advice can give clients the reassurance that they’re doing the right thing.

So what answers can you give to your clients to prove that independent professional advice is of benefit to them?

Type of advice

Show your clients that you are independent.  As their adviser, you can research the market and offer advice on the financial solutions available in the whole market.  Unlike banks, you can offer advice without any bias towards a particular product or provider.

Experience and knowledge

Independent financial advisers have a wealth of knowledge of the marketplace and the financial options available to clients.  They are aware of the regulations applying to financial products and can cut through the complexity of the market and the financial jargon to provide clients with real and tangible solutions for their financial needs.  Many advisers are also working towards greater qualifications, such as Certified Financial Planner (CFP) as well as keeping up to date with continuing professional development.


Different advisers have different charging structures, with some taking commission on the products they sell, others charging a fee for services and others taking a percentage of assets under management.  Some advisers use a mix of these options.  Be clear with your clients about how they pay for the service you provide. Help your client make a realistic assessment of costs by talking them through what options are available.

Independent financial advice can help customers save money.  By helping them take advantage of tax breaks at different times in their lives and by investing their money in the right products for them, you can add real value to their wealth.  The research shows that those who receive advice are more than twice as likely to have a pension and have nearly twice as much in savings and investments than those people who don’t get any professional advice.

Of course independent professional advice doesn’t just prove its worth in hard numbers.  Good advice helps customers understand their personal financial situation and those that receive advice are better aware of the need for making provision for an income in retirement and also during times of sickness. Those who use a financial adviser have more life assurance (57% v 27%), have more critical illness cover(25% v 10%) and have more income protection (11% v 2%)*.  It can also leads to a better understanding of financial advice, as people become more informed about what’s available.  With great advice, clients can put in place flexible, efficient long-term strategies for their financial futures.  It helps provide peace of mind that they are providing for themselves and their families into the future, allowing them to become more confident in their financial decision-making.

The opportunity is there for you to talk with your clients now, to tell them of the benefit you can offer them.

Getting good financial advice means success for you and your clients.  The trust that you bring to the relationship along with the support and research you provide, ensures your clients are in control of their financial futures.  They can look forward with confidence, knowing they’re saving and investing to have the lives they want.  Good advice is a great investment and together we need to promote how valuable it is.


*Research plus online survey of 1001 Irish adults, July 2013