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Top Six Trends in Pensions Right Now

We may spend up to one quarter of our lives in retirement so it is important that we have the means to fund our retirement years. The best and most tax efficient way of doing this is by taking out a pension.

A pension is an extremely tax-efficient way of saving money for your retirement, which allows you to get tax relief on your contributions now, while also allowing you to take up to 25% of the value of the fund as a tax-free lump sum upon retirement. Any growth in the fund is tax free.

If you are planning a pension, don’t delay – contact SCK Group today!

Interesting article in the Irish Times about the top 6 trends in pensions right now summarised below.

  • Buying Property with your pension pot

 

A buoyant property market has led to increased interest in property for pensions. However we shouldn’t forget the property crash and caution is advised. As with any investment plan, it is best to avoid an over-concentration in any single asset class.  Direct property investment can be an attractive option for some.

  • Multi Manager Solutions

 

This assumes that no one manager is highly skilled in investing in all areas and these strategies allocate funds to a range of fund managers, who specialise in certain disciplines. The challenge is to ensure that managers to not take on undue risk and manage within the guidelines you agree.

  • Last-Minute Funding

 

There is an increasing number of company directors maximising their contributions to their retirement fund. Private individuals approaching retirement age can put up to 40% of their salary into their pensions and claim top-rate tax relief. If the individuals are nearing retirement, they know that they won’t have to wait long to access their money.  This is a tax efficient way for Company Directors, with the required level of service, to extract money from their businesses.

  • Focus on digital communications and engagement tools

 

In the world of auto-enrolment and a move towards Defined Contribution schemes, there are new developments in digital communications and engagement tools for members. This provides a cost effective support for members.  Personalised messaging is more likely to drive action by members.

  • Choosing an ARF rather than an annuity at retirement

 

The rules for accessing Approved Retirement Funds (ARFs) have been relaxed in recent years leading to an increase in the number of retirees choosing an ARF as opposed to purchasing a lifetime income called an Annuity.   The cost of annuities has also risen considerably, meaning that retirees would need to live well into their 90s to see value from them.

  • Taking a transfer value from a DB scheme to access ARF options

 

Increasing numbers of defined-benefit scheme members are choosing the option to take a transfer value from the defined benefit scheme into an alternative pension arrangement. In some cases this is being incentivised by employers.  The member might wish to access an ARF at retirement or obtain a higher retirement lump sum by transferring.  Currently, it is not possible to access the ARF option directly from a defined-benefit scheme, however, there are increasing calls for this rule to be relaxed in the future.

Summary based on Mimi Murrays article in the Irish Times 28th Oct 2018

 

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