04/12/2018 QFA Pensions 2018/2019 Lecture Workshop Day Look at chapters Slides and manual Questions Your question Examples Calculations Approaching the exam On time Calculator…simple Pencil and rubber given Exam paper & Answer sheet Ignore others Time Time ‐ just over a minute ‐Tougher…longer mark and go back 1
04/12/2018 Approaching the exam Starting off Reading the question Focus and Concentrate Use your pencil Watch out for key words Read Twice Key Words Capitalised……nots Summary Preparation Practice questions Prioritise your time Read the question and focus Study Resources 2
04/12/2018 Supplied on the Day QFA Pensions Examination How many marks? Multiple Choice Questions 100 Questions 2 hours to complete examination 40% Pass rate 3
04/12/2018 For each correct answer a candidate will score 3 marks For each incorrect answer a candidate will score ‐1 mark (minus one mark) For each unanswered question a candidate will score 0 marks The exam will be marked out of 300 marks (100 x3 =300 ) 40%= 120 Marks Marks 100 x 3 =300 100% 80 x 3 =240 – 20 = 220 73% 60 x 3 =180 ‐40 =140 47% 55x3 = 165 ‐45 = 120 40% 50 x 3 = 150 ‐50 = 100 33 40 x 3 = 120 …none wrong 40 Study Regular Study (Early morning) Use Make Technology Notes Think how it Think how it Use affects your Coloured life Markers Join a Use Mind study Maps group 4
04/12/2018 Webinar 1 The Need for Retirement Planning Financial needs Death Illness Retirement Earned Earned Earned income is income income reduced stops stops or stops 5
04/12/2018 Different pillars of retirement provision State Pension Personal Savings Earnings in Private Provision • • Contributory Personal Contracts & Investments retirement • • Non Contributory Employer schemes Tax incentives for private pension provision Within Tax relief on Tax relief on limits contributions contributions Tax free Tax free investment investment return return Tax free lump Tax free lump Limit of €200,000 sum at sum at retirement retirement Which one of the following is earned income? A Credit union share dividends B Rental income C Income from a self employed trade D Gain on the sale of an investment property 6
04/12/2018 Webinar 1 Q & A Webinar 2 State Pensions Two different types of State Pension Social Social Insurance Assistance Must meet PRSI contribution Means tested conditions State Pension State Pension (Non (Contributory) Contributory) Survivor’s Survivor’s pension pension Invalidity Disability Pension Allowance 7
04/12/2018 PRSI Contribution Classes PRSI Covers Class A1 Most employees in the private sector. Civil and public servants recruited after 6 th April 1995. B1 & Permanent civil servants recruited before 6 th April 1995 D1 S1 The self employed and proprietary directors. State Pension Age Year of Birth Up to & incl 66 1954 1955‐60 67 1961 and 68 later State Pension Contributory PRSI classes A and S. Class B don’t qualify Pension €243.30 pw max Means tested No Qaulification conditions Yearly average of at least 10 week PRSI contributions; or 1/40 th for each year of PRSI contributions Adult dependant supplement Means test related to dependant’s weekly income. Income tax Liable to income tax but not USC; PAYE not deducted at source 8
04/12/2018 State Pension Contributory PRSI qualification conditions No Pension (max) €232 pw (under 80) Means tested Yes. Scaled by level of ‘weekly means’ Qualified adult supplement Yes Income tax Liable to income tax but not USC; PAYE not deducted at source State Pension Widow/Widowers/Civil Partners Contributory PRSI classes A, S, B & D Either deceased or survivor’s PRSI record can qualify Conditions Not cohabiting. Ceases if remarries or new civil partnership Means tested No Income tax Liable to income tax but not USC; PAYE not deducted at source State Pension Widow/Widowers/Civil Partners Contributory PRSI classes No PRSI requirements Conditions Not cohabiting. Ceases if remarries or new civil partnership. No dependant children. Means tested Yes Income tax Liable to income tax but not USC; PAYE not deducted at source 9
04/12/2018 Class S PRSI applies to which one of the following? A Frank, a Garda who joined the public service in 1990 B Paula, a self employed dentist C Fiona, a civil servant, who joined the public service in 2008 D Owen, who is an employee of a large Bank in the private sector. Which one of the following groups are NOT covered for the State Pension (Contributory)? A Employees in the private sector B Public service employees who joined the public service before 6 th April 1995. C Public service employees who joined the public service after 6 th April 1995. D Proprietary directors in the private sector. Webinar 2 Q & A 10
04/12/2018 Webinar 3 Personal Contracts Personal Contracts Retirement Personal Annuity Contracts Retirement Savings (RACs) Accounts (PRSAs) provided by life provided by life assurance assurance companies and by companies only investment firms A legal contract Provider Contributions Retirement Fund 11
04/12/2018 Who can take out an RAC? Has a source of ‘relevant earnings’ in the current tax year Had a source of ‘relevant earnings’ in a past tax year and paid an RAC/Section 785 contribution in that year Relevant earnings : self employed trade/profession earnings & non pensionable employment earnings Who can take out a PRSA Anyone … but income tax relief only allowed against relevant earnings Income Tax relief on RAC & PRSA contributions No relief for USC or PRSI Age attained during Tax relief limit year (% of Net Relevant Earnings) Less than 30 15% 30 to 39 20% 30% rate also applies to 40 – 49 25% professional 50 – 54 30% sports 55 – 59 35% earnings 60 and over 40% under age 50 Max Net Relevant Earnings : €115,000 12
04/12/2018 Employer contribution to an employee’s PRSA Employer contribution BIK for • No PRSI or USC income tax Claim • As personal income tax contribution, within limits relief Carry forward income tax relief RAC/PRSA Allowed as a deduction contributions not against relevant earnings allowed for income tax relief in 2018 in 2019 Backdating contributions Backdated and RAC/PRSA deducted for income contributions paid in tax against 2017 2018 relevant earnings Must opt to backdate before the 31 st October (mid November if paying AND filing tax online with the online ROS system) 13
04/12/2018 Charges Entry Ongoing Exit Entry Charges Non Fixed Contribution allocation monetary charge period charge Ongoing Charges Fund Annual fund Policy fee switching charge charge 14
04/12/2018 Exit Charges Early encashment charge Intermediary commission charges Initial Renewal Trail Restriction on PRSA charges Standard Non Standard PRSA PRSA Maximum 5% No maximum contribution charges charge Maximum 1% pa annual fund charge 15
04/12/2018 Reduction in Yield (RIY) A measure of the impact of charges in terms of the equivalent annual reduction in investment return When RAC/PRSA can benefits can be taken? Before age 60 to 75 60 Anytime between Permanent incapacity these ages; no at any age requrement to give up work From 50 for certain occupations PRSA: voluntary early retirement from an employment, from 50 onwards. How can RAC/PRSA benefits can be taken? If not receiving pension of €12,700 pa or have previously invested €63,500 in an AMRF or Balance annuity • Taxable lump Next €63,500 sum, or • Approved • Approved First 25% Retirement Fund Minimum (ARF), or Retirement Fund • Lump sum; • Annuity (AMRF), or • tax free up to • Annuity €200k • Next €300k taxed at standard rate 16
04/12/2018 Vested PRSA alternative If not receiving pension of €12,700 pa or have previously invested €63,500 in an AMRF or Balance annuity • Retain as non Next €63,500 ring fenced amount • Retain as ring First 25% fenced amount • Lump sum; • tax free up to €200k • Next €300k taxed at standard rate Provision of Information RACs Generic Specific Annual Disclosure Disclosure statement of Notice Notice value Provision of Information PRSAs Half yearly Statement of Preliminary Invesment Reasonable Disclosure Report + Annual SRP Projection Certificate (PDC) Statement of (SORP) Account 17
04/12/2018 Pension Term Assurance cover Standalone Standalone • Not attached • Not attached Associated Associated to an RAC to an RAC • Attached to an RAC • Attached to an RAC Own life only Life cover only, payable to estate Can not be assigned Cover can not extend beyond 75 A Pension Term Assurance policy can provide which one of the following benefits? A Life cover to age 80 B Joint life cover C Life cover to age 75 D Serious illness cover Joe is employed by a small shop and contributes to an RAC. What is the earliest age he can take retirement benefits from the RAC, assuming he remains in good health? A 50 B 55 C 60 D 65 18
04/12/2018 Webinar 3 Q & A Webinar 4 Employer Pension Schemes Employer Pension Schemes 19
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