The Importance of Financial Planning

Reminder to Submit Your Pension Contribution Before the Pay and File Deadline

We’re just writing to remind you to take full advantage of the generous tax relief available on your 2015 pension contribution before the pay and file deadline of 31st October, or 10th November if you file through Revenue Online Service (ROS).

Depending on your age and income, you may be eligible for up to 40% tax relief on your personal pension contribution for 2015.

Depending on your age and income, you may be eligible for up to 40% tax relief on your personal pension contribution for 2015

Every €100 you contribute to your pension could cost you as little as €60*

* Revenue rules, age and income related rules apply.

With tax free growth on your investment we believe it is a highly efficient and effective method of converting your current income into long term personal wealth.

To take full advantage of this generous tax relief, review your existing pension funds and start your Lifetime Financial Plan please call us at 046 9240961 or visit our website at www.lifetimefinancial.ie

We look forward to hearing from you.

 

Aidan Wall

Aidan Wall

QFA, FLIA, SIA

Aidan Wall is a Qualified Financial Advisor, a Fellow of the Life Insurance Association and a Senior Investment Advisor.
Aidan has been providing impartial financial advice to clients since 1983, and he has acquired vast experience in the areas of Financial Planning, Family Income Protection, Retirement Income and Investments.

E: aidan@lifetimefinancial.ie

Dr Michael Wall

Dr Michael Wall

APA, PhD

Dr Michael Wall, PhD, is an Authorised Product Advisor (APA).
As an Authorised Product Advisor (APA) Michael is working under the mentorship of Senior Financial Advisor, Aidan Wall and has completed his QFA (Qualified Financial Advisor) examinations.

E: michael@lifetimefinancial.ie

The Importance of Financial Planning

The Effect of Brexit on Pensions & Investments

A few Clients have asked about the effect of the Brexit decision by the UK on Investments and Pensions. The main effect of such news would be on the Equities (shares) part of portfolios. The two main markets we use are the Standard & Poors 500, (the 500 largest companies in the US), and the FTSE100, (the 100 largest companies in the UK).

One week after the shock decision, the effect on these Markets has been negligible.

The best way to assess the effect is to compare the value of a €50,000 Euros investment in the first three weeks of June, to the value of that investment at the close of business on 1st July, one week on from the shock announcement. The value at 1st July would be €50,129, a slight gain. Similarly a €50,000 Euro investment in the Standard & Poors 500, in the same period would have  ended up yesterday at €50,799, again a slight gain.

When such events occur, you always have to bear in mind

  • The Media always exagerate bad news. They give much less coverage to good news, such as recovery from market shocks.
  • Markets always tend to over-react to bad news initially.
  • You always have to take into account exchange rates, as well as changes in the stock markets.

If you have any queries please call our office on 046 9240961
Aidan Wall QFA FLIA
Lifetime Financial Planning 

The Importance of Financial Planning

Budget 2016 – How it affects your Pension, Protection & Investments

We’ve compiled a summary of how Budget 2016 will affect you in the areas of pensions, life protection, investments and inheritance tax.

1. Pensions

It was not until the Finance Act last year that we saw pension changes introduced so we will wait until the Finance Bill is published in the coming weeks to see what further changes, if any, are on the horizon.

For now, we have set out below the pension changes announced in the Budget and the relevant rules that apply.

Tax Relief on Pension Contributions

Income tax relief on personal contributions to a qualifying pension arrangement continues to be available at the marginal rate of tax (40% for higher rate taxpayers).

For those individuals electing to backdate personal contributions to tax year 2014, relief remains available at the 41% marginal tax rate (for higher rate taxpayers). The Income Tax Self-Assessment “Pay and File” deadline is 31 October 2015 for paper returns. This deadline is extended to 12 November 2015 for those who use the Revenue On-line Service (ROS) to both file and pay their taxes.

There was no mention in the Budget of a change to the earnings cap of €115,000. 

Maintaining the levels of tax relief on pension contributions is welcome as making adequate provision for retirement is a vitally important aspect of financial planning. Making provision for retirement through a private pension arrangement remains the most tax efficient form of long term saving.

Pension Fund Levy

The Pension Fund Levy has now been abolished from the end of 2015 as confirmed in last year’s budget. This is encouraging for all those who are in private sector pensions and should restore some confidence that pension savings will no longer be targeted. The levy has come at a significant cost though as pension savings have taken a hit in excess of €2bn over the last 5 years.

Standard Fund Threshold (SFT)

The SFT remains at €2 million for 2016.

The Minister did not address in his speech whether the SFT will be increased in line with inflation in the future. Section 787O of the Taxes Consolidation Act 1997 allows the Minister to apply an earnings adjustment factor to the SFT. While it is good news that the SFT has not been reduced, we would have concerns that the SFT will not keep pace with inflation if not regularly reviewed by the Minister. We await details of the Finance Bill as this may be dealt with at that time.

Any capital value in excess of the SFT or PFT (if applicable) on retirement is taxed at 40% and is then subject to tax at the individual’s marginal rate, and any PRSI and USC applicable on drawdown.

Retirement Lump Sum

The Budget did not include any changes in relation to the tax treatment of the retirement lump sum.

The first €200,000 of a retirement lump sum remains tax free with any amount between €200,000 and €500,000 subject to income tax at 20%. Any lump sum amount paid out in excess of €500,000 is taxed at the marginal rate and is also subject to PRSI and USC. Retirement Lump Sums taken on or after 7 December 2005 count towards an individual’s retirement lump sum limits.

State Pension (Contributory)

The maximum personal rate of the State Pension (Contributory) has increased by €3 per week to €233.30 per week effective from 1 January 2016. This is the first increase since 2009.

The earliest age at which the State Pension (Contributory) is payable is currently age 66.

2. Exit Tax

There was no mention in the Budget of a change to the current exit tax rate of 41% on life assurance policies effected after 1 January 2001 (known as gross roll-up policies).

3. DIRT (Deposit Interest Retention Tax)

There has been no change to the rate of DIRT on savings. This remains at 41%.

4. Income Tax, PRSI and USC

Income Tax

Contrary to some media speculation, there has been no change to income tax rates or tax bands. The higher rate of income tax remains at 40% and the standard rate of income tax is unchanged at 20%.

There were no changes to tax credits other than:

  • The introduction of a new Earned Income Credit of €550 for taxpayers earning self-employed trading or professional income and to business owners/managers who are not eligible for the PAYE credit, and
  • An increase in the Home Carer’s Allowance of €190, from €810 to €1,000.

These changes are effective from 1 January 2016.

PRSI

The rates of PRSI remain unchanged.

Universal Social Charge (USC)

The Government has announced a number of changes to the USC to take effect from 1 January 2016:

  • A reduction in three of the existing rates
  • An increase in the USC entry point and bands

Total income of €13,000 or less per annum is exempt from the USC.

The following USC rates will apply if total income is in excess of €13,000:

  • 2016 Rate
  • 1%
  • 3%
  • 5.5%
  • 8%
  • 2016 Threshold
  • €0 to €12,012
  • €12,013 to €18,668
  • €18,669 to €70,044
  • €70,045 to €100,000
  • 2016 Rate
  • 1%
  • 3%
  • 5.5%
  • 8%

The USC rate on PAYE income in excess of €100,000 is 8%.
The USC rate on self-employed income in excess of €100,000 is 11%.

In 2015 total income of €12,012 or less per annum was exempt from the USC and the USC rates that apply for 2015 for total income in excess of €12,012 are as follows:

  • 2015 Rate
  • 1.5%
  • 3.5%
  • 7%
  • 8%
  • 2015 Threshold
  • €0 to €12,012
  • €12,013 to €17,576
  • €17,577 to €70,044
  • €70,045 to €100,000
  • 2015 Rate
  • 1.5%
  • 3.5%
  • 7%
  • 8%

5. Corporation Tax

There is no change to the Corporation Tax rate of 12.5% for trading income and 25% for non-trading income.

6. Capital Acquisitions Tax (CAT)

There was no mention in the Budget of a change to the current CAT rate of 33%.

The CAT threshold for Group A has increased from €225,000 to €280,000 with effect from 14 October 2015. The table below shows the CAT thresholds that will apply from this date.

2016 CAT Thresholds

Group A: €280,000

Applies where the beneficiary is a child (including adopted child, stepchild and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.

Group B: €30,150

Applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or lineal descendant of the disponer.

Group C: €15,075

Applies in all other cases.

7. Capital Gains Tax (CGT)

The rate of CGT remains unchanged at 33%.

A reduced CGT rate of 20% is being introduced for entrepreneurs on the disposal in whole or part of a business up to an overall limit of €1m in chargeable gains. This is effective from 1 January 2016.

Legislation including the Finance and Social Welfare Bills are expected to be published in the near future and we wait to see if they contain further changes not specifically announced in the Budget.