It doesn’t seem that long ago since we celebrated the arrival of the new century and now we are into the 3rd decade of that century – time marches relentlessly on.  As we settle into 2020 maybe now is a good time to reflect on the impact that time has had on our lives and to consider the future and what it may hold for us, in the pensions world anyway!

Normally around this time of year we ponder on changes we can make in our daily lives and if you do not have a pension plan then maybe starting one could be one of your better New Year’s Resolutions.

You may not feel that you need to save for your retirement but here’s 3 things to consider – the State Pension amount, service gaps and longer life expectancy.

The State Pension

Firstly, think of your annual take home pay which you currently live on. Now, compare that figure to €12,912. Could you live on this amount a year? That’s the maximum State Pension amount for a single person. Will this amount enable you to do all those things on your bucket list that you’ve planned for when you’re finished work? I’ve heard the drop in income from the time you are working to the day you go on to State Benefits being described as falling off a cliff.  Not a pleasant image and certainly something we all want to avoid if we can.

Service Gaps

During your career, have you already or do you plan to take a break for one reason or another? Maternity or paternity leave, home care, rearing of children? This can affect State Pension entitlements and can also reduce the number of years you have to save towards your retirement.

Longer Life Expectancy

On a positive note, our life expectancy is increasing; 50% of those born today are expected to live to 100. And indeed some of our CPAS pensioners are over the age of 100 with the oldest being 105! As well as this, the State Pension age is increasing and will be age 68 by 2028. While living longer can be good news, what this also means is that our savings have to stretch further and last a lot longer. That €12,912 a year just isn’t going to cut it.

Tax Incentives

The Government want us to save for retirement so what incentives have they given us? Often going unnoticed because people pay pension contributions from their salary at source, the tax break on pension contributions is one of the most generous available from the Revenue. Tax relief is available at your marginal rate of tax and the table below shows you the net cost of a €100 pension contribution based on your current rate of tax.

And the tax breaks don’t stop there.  Employer contributions receive corporation tax relief as they are offset against profits before tax and they are not added to employee’s salary as a Benefit in Kind.  Investment growth on pension fund savings is tax free and at retirement, members can receive a sizeable amount of their fund as a lump sum also tax free (subject to Revenue maximum limits).  Annual pension income is subject to tax under the PAYE system but as a pensioner the tax allowances are generous.    

Next Steps

Now is the time for the construction sector to make a difference to the future of all their employees through pension savings.  CPAS can facilitate this on the same terms as site workers through the Construction Workers Pension Scheme or we can design a bespoke arrangement for individual employers and members through the Construction Executive Retirement Savings (CERS). 

This year CPAS are delighted to be a sponsor of the ICE Awards 2020 and as the providers of choice for the construction industry we are proud to see that over 90% of the Award nominee companies are clients of ours.

CPAS talk your language so don’t hesitate to call us today and we can get you started!  You can contact Frances McNally at fmcnally@cers.ie

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