• Pensions

• Pensions Frequently Asked Questions

• Personal Retirement Savings Account

• Income protection

• Personal Accident

 

 

PENSIONS

Why do I need a pension?

People who retire from work (typically between 60 and 65) are now expected to live for a further period of approximately 20 years on average, due to better lifestyle and healthcare. If your only income was to be the State Old Age Pension this could result in a significant drop in your standard of living. Therefore planning for retirement is essential if you wish to maintain the lifestyle you enjoyed during your working life.

 

What other benefits are there?

• You get a tax relief on any money you contribute to provide a pension fund.

• The government does not tax the investment return earned on your pension contributions.

• A pension enables you to maintain a decent standard of living following retirement.

Starting a pension plan is one of the most important investment decisions you will ever make. Security in your retirement is a issue to think about and plan for now. Saving regularly for retirement and starting as soon as possible is perhaps the best investment advice you will ever get.

 

PENSIONS FREQUENTLY ASKED QUESTIONS   

Here are some frequently asked questions which people often have in relation to pensions.

When should I start contributing to a pension?

As soon as possible! The arguments for starting your pension as early as possible are overwhelming. The size of your pension income when you retire is affected by the length of time your money is invested for. Depending on the return earned by your pension fund, a euro put aside in your mid-twenties can be worth between two and a half and four and a half time a euro put aside in your mid-fifties.

 

What type of pension should I take out?

There a number of different types of pensions available. A personal pension plan is for self-employed individuals, workers whose employer does not offer a pension scheme, or for workers who do not wish to join their employers scheme, and is entirely funded by the individual. A group pension plan is one that is provided by your employer. If you are working for a company and no pension scheme is in place, your employer may agree to set up an individual pension for you.

 

What happens to my pension contributions should I die before retirement?

If you die before you retire, the current value of your Personal Pension fund will be paid to your estate. Under a Company Pension, the scheme will normally provide two benefits if you die in service before normal retirement age. A tax free lump sum of up to four times your remuneration at the date of death and the scheme may also provide a spouse's pension of two thirds of the maximum pension which you would have received if you had retired on grounds of ill health at the date of your death.

 

Am I entitled to the State Old Age Pension when I retire even if I take out my own pension?

If you have made the required number of PRSI contributions during your working life then you are entitled to the State Contributory Old Age Pension. As not all occupations pay full PRSI, you need to check whether or not you pay full PRSI.

 

How do I make payments to a pension?

Payments can be made on a monthly, quarterly, half-yearly or annual basis by cheque or direct debit.

 

I'm a temporary/contract based worker - should I take out a pension?

This depends on how regular your income is. If your income is regular, we would recommend a regular premium plan. You do have the option of a 'premium holiday' for periods when you maybe unable to contribute to the plan. However if you have a very irregular income we would not suggest a regular plan.

 

How do I claim tax relief?

If you are in a group pension scheme your pension contribution is taken directly from your gross salary (salary before tax) so it is never taxed. When you take out a Personal Pension you receive a tax certificate after you start. You send this to your tax inspector. If you are self employed, your tax bill will be reduced when you send in your tax certificate with your annual returns.

 

If I change employment can I take my pension with me?

If you have been employed by a company which included you in a pension scheme and you change employment, you can transfer the value of this fund to the new scheme with your new employer. However, if you were previously self employed with a personal pension and moved to a company with a pension scheme you can no longer keep contributing to your personal pension plan.

 

PERSONAL RETIREMENT SAVINGS ACCOUNT   

• Personal Retirement Savings Account (PRSAs) are a new type of pension which have just been launched into the Irish market. They are designed to be a low-cost, easily understood and portable pension.

• Everyone can take out a PRSA. You can contribute to a PRSA even if you are not working at that time.

• You can contribute to your PRSA by payroll deduction from your wages or by direct debit from your bank account.

• Your employer can contribute to your PRSA, but is not legally obliged to do so. Minimum contributions on employees vary from company to company.

• You will be able to bring your PRSA with you from job to job.

• You can normally draw on your PRSA fund at any time between ages 60 and 75.

• There are no limits to PRSA benefits. When you draw on your PRSA, 25% of the accumulated fund can be taken tax free, with the balance being used to purchase a taxable pension for life or invested in an Approved Retirement Fund which you can draw on during retirement.

 

How do PRSAs affect you as an employee?

If you are not currently a member of a company pension plan you might consider setting up a PRSA for the provision of long-term retirement savings.

Your employer will be obliged to provide mandatory access to at least one Standard PRSA where there is no company pension plan i place.

Employers will also be obliged to provide mandatory access to at least one Standard PRSA where membership of an existing company pension plan does not cover all employees or is subject to a waiting period of 6 months or more, or where members are provided with death in service benefits only.

If this case, under the legislation your employer will have to

• offer at least one Standard PRSA product

• notify employees of their right to contribute to a Standard PRSA by payroll deduction

• offer a salary deduction facility for any employee who wishes to set up a PRSA

• allow PRSA Providers or intermediaries (acting on their behalf) access to non-pensioned employees at the workplace

• allow non-pensioned employees reasonable paid leave of absence to meet with a PRSA Provider or an intermediary (acting on their behalf)

• deduct any remit employee contributions to the product provider within 21 days of the end of the month in which the deduction is made

• notify employees of certain information on a regular basis

Employers will not be obliged to contribute to a Standard PRSA on behalf of employees.

The above requirements are mandatory for employers from the 15th September 2003.

 

How do PRSAs affect you as an employer?

As an employer, you will be obliged to provide mandatory access to at least one Standard PRSA where there is no company pension plan in place.

You will be obliged to provide mandatory access to at least one Standard PRSA where membership of an existing company pension plan does not cover all employees or is subject to a waiting period of 6 months or more, or where members are provided with death in service benefits only.

If this case, under the legislation employers will have to

• offer at least one Standard PRSA product

• notify employees of their right to contribute to a Standard PRSA by payroll deduction

• offer a salary deduction facility for any employee who wishes to set up a PRSA

• allow PRSA Providers or intermediaries (acting on their behalf) access to non-pensioned employees at the workplace

• allow non-pensioned employees reasonable paid leave of absence to meet with a PRSA Provider or an intermediary (acting on their behalf)

• deduct any remit employee contributions to the product provider within 21 days of the end of the month in which the deduction is made

• notify employees of certain information on a regular basis

As an employer you will not be obliged to contribute to a Standard PRSA on behalf of employees.

The above requirements are mandatory for employers from the 15th September 2003.

 

How do PRSAs affect you as a self employed individual?

A self-employed person such as you, who is not trading through a company, might consider using a PRSA to make provision for long-term retirement savings. You are already entitled to contribute to a Personal Pension Plan with a life insurance company. Following the introduction of PRSAs, you will have three main options

• you could contribute to a Personal Pension Plan, or

• you could contribute to a Standard/Non-Standard PRSA, or

• you could contribute to both a Personal Pension Plan and a Standard/Non-Standard PRSA.

 

Standard PRSA:

Your Standard PRSA gives you:

• Simplicity: you can start your Standard PRSA with as little as 25€ per month and with low charges, your money works from day one.

• Flexibility: regular contributions can be stopped, reduced or restarted at any time without penalty. You can also make one-off contribution if you wish.

• Value for money: there are only two charges, which will not be more than 5% of your contribution and no more than 1% of the value of your fund each year. Because you get tax relief on all your contributions, your Standard PRSA is a very tax efficient way of saving for your retirement.

 

Am I eligible?

You can contribute to a Standard PRSA if:

• You are over 18 and under 75 years of age

• You are self-employed, employed or unemployed

Note: Anyone can enter into a Standard PRSA contract but members of company pension plans can only obtain tax relief on Standard PRSA contributions if they are made as AVC PRSA contributions.

If you are self employed you will be able to contribute to both a Personal Pension Plan and a Standard PRSA.

 

What if I have an existing pension?

If you currently have a Personal Pension Plan you will be able to contribute to a Standard PRSA.

Members of company pensions plans can contribute to a Standard PRSA but will only obtain tax relief on Standard PRSA contributions if they are made as AVC PRSA contributions.

 

INCOME PROTECTION

 

• Plans Details:

Income Protection offers you financial security for yourself and your family if you are unfortunate enough to be out of work because of an illness and suffer a loss of earnings as a result of a disability, an injury or an accident.

This plan will provide you with an alternate source of income. This income is a weekly benefit payable after a deferred period of either 13, 26 or 52 weeks. The deferred period is the length of time between when the illness is first diagnosed and when you start receiving an income benefit.

 

What types of disability are covered?

Your plan will protect your income against

• any illness

• any injury

• any disability or

• any accident

resulting in you being unable to work for longer than your deferred period. While we do not cover normal pregnancy situations, we do cover any disability caused by pregnancy, however, in such circumstances your deferred period commences from the date your pregnancy ends.

 

• Additional benefits:

- Hospital benefit: Under this plan, you can receive an income benefit any time during the deferred period if you spend more than 7 days in hospital. The amount you receive will be equal to 1/7th of your weekly benefit for each day spent in hospital starting on the eighth complete day and payable up until the earliest of:

• your last day spent in hospital

• the 91st day spent in hospital

• the date when the deferred period ends

• the date you die or

• the date your policy ends.

 

-Overseas benefit: If you claim income benefit while you are outside the European Union, we will pay your income for 13 weeks in a 52-week period or 39 weeks in total. If you return to Ireland or the European Union within this time, we will continue to pay your income benefit.

 

- Changing occupations: We will continue to cover you if you change jobs, regardless of what your new job entails. If you are made redundant, you can continue your plan while looking for another job. You cannot claim benefit while unemployed.

 

- Premium protection: You do not have to continue paying premiums while receiving an income benefit. Instead we will pay your premiums for you and when your claim finishes you will restart paying premiums.

 

- Guaranteed increase option: Our guaranteed increase option allows you to increase your income benefit by 20% of your original income benefit without having to provide new evidence of health. This offer will be made to you every 3 years up to a maximum of 100% of your original income benefit. However, if you decline this option twice, we will not offer it to you again.

 

• Optional benefits:

- Indexation: You can index your income benefit by 3% each year. This feature applies before, during and after any claim you make, and ensures that as your salary increases each year, so too will your replacement income. Your premiums will also increase by 3% each year.

 

• Income Benefits on returning to work:

- Proportionate benefit: We will pay you a reduced income benefit if you return to work to a different job. This benefit applies if your new salary is less than your old salary. Your reduced benefit will be your full benefit multiplied by the percentage fall in your salary. For example, if your new salary is 60% of your salary under your previous job, you will continue to receive 40% of your income benefit.

- Rehabilitation benefit: We will pay you a reduced benefit if you return to your normal job on a reduced basis, such as part-time. The benefit is calculated in the same way as for proportionate benefit.

- Relapse benefit: We will immediately restart paying your income benefit if you have a relapse within 6 months of returning to work.

 

• Premium Types:

- Guaranteed premiums: The guaranteed premium option will ensure that your premium will not change during the term of the plan if your chosen benefits remain the same. This allows you to know in advance how much your premiums will be over the term of the plan.

- Reviewable premiums: The reviewable premium option will guarantee your premium stays constant for the first 5 years of the plan. We will then review the premium every 5 years thereafter. In the review we will take into account claims experience over the preceding years and changes in economic conditions. We will also take into account any medical breakthroughs and the discovery of any new diseases. If it is necessary to change the premium, we will offer you the choice of an increase in premium or a reduction in benefits.

 

• Encashment:

This plan will have no cash-in value at any time.

 

• Taxation:

Tax relief on premiums: You will receive tax relied on all premiums you pay (up to a maximum of 10% of your total salary) at your marginal rate of tax. If paying by salary deduction, you will also benefit from lower PRSI deductions.

Tax on income benefit: You will receive your income benefit net of income tax under PAYE.

 

• Limits:

- Age limits

• Minimum entry age: 19 NBD

• Maximum entry age: 55 or 5 years prior to ceasing age if younger

• Ceasing age: 55, 60, 65.

- Terms limits:

• Minimum term: 5 years

• Maximum term (ceasing age): to age 55, 60 or 65.

- Premiums limits:

• Monthly: €12

• Quarterly: €36

• Half-yearly: €72

• Annually: €120

• No maximum limit applies

- Benefit limits:

• Minimum benefit: €100 per week

• Maximum benefit: €2,400 per week

• The maximum benefit allowed is calculated as 75% of first €82,000 of your earnings plus 33% of the balance of your salary subject to a maximum of €2,400 per week (subject to a maximum of 75% of your net relevant earnings less total state benefits).

 

• Method of payment

Monthly, quarterly half-yearly or annually. All payments other than annual must be by direct debit.

 

• How to get a quote

You can e-mail the following details to paula.ocallaghan@bbg.ie or call (022) 44598 and ask for Paula O'Callaghan:

• name

• address

• telephone number

• date of birth

• occupation

• gross weekly/yearly Income

• deferred period required

• ceasing age required

• Is indexation required?

 

PERSONAL ACCIDENT

- Personal Accident covers seem complicated. What does it actually cover?

Firstly, cover provides tax free lump sum benefits in the event of death or loss of eye(s), speech, hearing or limb(s). There are also lump sum payments for permanent total disabilities that prevent the individual from working again. You can extend to include temporary disability or illness cover that prevents the insured from working - these will pay weekly benefits agreed by you and the underwriter. There is usually a "deferment period" for weekly benefits, normally based on nature of occupation, e.g. cover will not include the first seven days of illness. Weekly benefits will be paid for a maximum of 104 weeks in the event of an accident and 52 weeks in the event of illness.

 

- Who are the benefits paid to?

In the case of individual policies the benefit is paid directly to the insured. With a group or corporate policy, the benefit is payable to the company. This means that the director can use the income to fund temporary staff, replace lost income due to the employees' absence or to pay "sick pay" - or any combination of the three. It is up to the company how they use the benefit, or the payments they will make.

 

- Why should companies or individuals buy cover?

It's easy to see why a company should have cover. It offers financial protection for the business, covers temporary staff or re-hiring costs, can be used as a valuable employee benefit - or all three. For individuals it not only offers income protection against accident and/or illness, but gives an extremely valuable protection against accidental death, or never being able to work again through disability. Remember, if you are killed in a car crash your life insurance will provide financial help for your loved ones. If you survive that crash, but can't work, who provides then?

 

- What does the terminology mean?

• Death cover: Simply that. Remember it's accidental death cover.

• Capital benefits: Cover for loss of limb(s), eye(s), hearing and speech.

• PTD: Permanent Total Disability preventing the insured from working again. Pay a lump sum benefit.

• TTD: Temporary Total Disability following an accident which will prevent the insured from working again for a period of time. This pays a weekly benefit, tax free.

• Deferment Period: The "excess". The period during which no benefit is payable. Usually 7 or 14 days from the accident.

• Continental Scale: Extended "capital Benefits" (see above) to cover parts of limb(s), hand(s), feet and individual digits.

• Illness Cover: To cover periods of absence due to illness. Normally at least a 7 days deferment period.

 

- How to get a quotation?

You can e-mail the following details to paula.ocallaghan@bbg.ie or call (022) 44598 and ask for Paula O'Callaghan:

Individual:

• Name

• address

• telephone number

• date of birth

• occupation

• gross weekly/yearly income

• full details of any previous claims

Group:

• Name of company

• trade

• brief description of activities

• number of insured persons

• overall wage roll plus highest individual salary

• business travel pattern if this is to be included, split between Ireland, UK, Europe, Rest of the world and USA/Canada

• Full details of any previous claims.