In association with NUI GALWAY ADDITIONAL VOLUNTARY CONTRIBUTION SCHEME BOOKLET 10th January 2013 Presented by: Noel Hackett, QFA (QFA, MLIA, MIB, Dip Investments) Pensions Specialist New Ireland Assurance 20, The Crescent, Limerick Tel: 061-312166 Mobile 086-8186163 Email: Noel.hackett@newireland.ie INTRODUCTION. As a member of the National University of Ireland, Galway (NUI Galway) Pension Scheme, you have taken the first steps to provide for your financial future. When you retire, you will expect to maintain the same standard of living, yet you will have more time to spend with your family, to go on exotic holidays and so on. Research* shows that we are now living much longer, men to age 78 and women to age 82.3, which means we will need more income in retirement. (*CSO Statistical yearbook of Ireland 2010). Just ask yourself, will the pension from my employer’s pension scheme be enough to retire on? The generous benefits provided by NUI Galway may fall short of the ideal income level that you may require. There are a number of reasons why this might be so: 1. Reduced benefits will normally be payable by the Scheme if you take early retirement. 2. You may have joined the Scheme relatively late in your working life, and thus may not qualify for the maximum benefits under the Scheme. 40 years service is required to secure the maximum benefits under your Scheme. 3. The NUI Galway Pension Scheme may provide a lower pension benefit than the maximum allowed by Revenue Commissioners. This is the case if you joined the Scheme after 6th April 1995. You may simply wish to avail of the: maximum benefits which are approved by the Revenue Commissioners, generous tax reliefs on your contributions, and new and enhanced retirement options that are open to you and your AVC fund at retirement. It is important to consider making AVCs to top up your pension to help provide for a comfortable retirement. You can take advantage of the generous tax reliefs available on your contributions, and also bearing in mind that all growth in your AVC fund is currently exempt from DIRT and other taxes. TAX ADVANTAGES: You will normally receive full tax relief at your marginal rate on all pension contributions that you make. The limits on the percentage of your earnings on which you can claim this relief depends on your age, as set out in the table below: Up to age 30 30 to 39 40-49 50- 54 55 – 60 Age 60 + 15% of gross salary 20% of gross salary 25% of gross salary 30% of gross salary 35% of gross salary 40% of gross salary These maximum limits include contributions to the NUI Galway Pension Scheme plus any other AVCs that you may make. Your gross salary for pension tax relief purposes is restricted to €115,000 in 2013. This figure may be subject to revision by the Minister for Finance every year. It is important to note that tax relief is not automatically guaranteed and, in certain circumstances, your contributions may have to be restricted in order to comply with Revenue limits - you will be advised if this affects you. Legislation currently restricts the maximum pension fund you may have on retirement. It also restricts the amount of Tax-free cash you may take. These limits apply to the aggregate of all of your pension plans. These limits (which can change each year) are €2,300,000.00 and €200,000 tax free lump sum and €375,000 taxed at 20% standard rate of tax respectively for 2013. The excess amounts will be subject to tax, if your benefits at retirement exceed the limits. In addition to the tax relief on contributions, the following valuable tax incentives are available: 1. 2. 3. Income Tax Relief at your marginal rate of tax (20% or 41%*) will be granted automatically, if you are eligible for it - as your AVC contributions are deducted by NUI Galway Payroll at source every month. You will not have to complete or submit forms to the Tax Office to avail of this relief. The AVC Pension fund in which you invest is completely free from Income tax, DIRT tax and Capital Gains Tax. Part, or in some cases all, of your AVC fund may be taken as a Tax Free Lump Sum on retirement. This Additional Voluntary Contribution Scheme is separate to the NUIG Pension Scheme ‘Purchase of Notional Years of Service’ facility. For further information on this facility please contact NUIG. You should carefully consider which one is most suited to your needs. MAXIMUM FLEXIBITY AT RETIREMENT THROUGH AVCs. By investing in Additional Voluntary Contributions, there is the widest possible choice of benefits at retirement - so you can pick the benefits that suits you best. If your NUI Galway Pension Scheme benefits fall below the maximum allowed by the Revenue, you may be able to use your AVC contributions to: 1. 2. 3. 4. 4. Boost your tax-free lump sum at retirement. If you joined the NUIG Scheme before 5th April 1995, take a tax-free lump sum at retirement, without reducing your pension. Increase your pension income in retirement Increase the pension payable to your spouse or dependants upon your death in retirement. Increase the lump sum benefit payable if you should die in service. You can also, again subject to Revenue limits and conditions: A Arrange for the pension bought by your AVCs to increase in payment, to offset the impact of inflation. B Invest your Fund in an Approved Retirement Fund. C Take your AVC fund as an immediate taxable lump sum. Approved Retirement Fund (ARF) Due to changes in the Finance Act 2000, you can now choose to invest your AVC fund at retirement in an Approved Retirement Fund (ARF). ARFs have a broad range of investment options, and a regular income facility can be availed of. It is also worth noting that you will have full control and access to your ARF money post retirement. More importantly your ARF fund can be passed on to your Spouse or on to your estate as part of your inheritance tax planning. There are important changes recently announced in the Budget 2010 that may affect ARF Planning. Please contact Noel Hackett for further information. Please note certain conditions and taxes apply to ARFs. Further information is available on request and will be provided to you when you are retiring. WHAT SHOULD I DO NEXT To find out more about the NUI Galway Group AVC Scheme and help fulfil your retirement dreams, simply contact the following: Ms Triona Lydon NUI Galway Pensions & Investment Office Tel:091-492145 EXT: 2145 Email:Triona.lydon@nuigalway.ie Ms Ann Cormican NUI Galway Pensions Office Tel; 091-495901 EXT: 5901 Email: Ann.cormican@nuigalway.ie OR: Noel Hackett, (QFA, MIB, Dip Investment Planning) Qualified Financial Advisor Pensions Consultant New Ireland Assurance 20, The Crescent Limerick Tel : 061-312166 Mobile: 086-8186163 Email: Noel.hackett@newireland.ie Ring, Text or Email Noel Hackett to arrange an Appointment to open your AVC account, or for further information. This brochure is based on our understanding of current legislation and Revenue practice as at Jan 2013. While great care has been taken in its preparation, this brochure is of a general nature and should not be relied on in relation to a specific issue without taking financial, insurance or other professional advice.*** If any conflict arises between this brochure and the Policy Conditions, the Policy Conditions will apply. Important Note: It is important to note that the value of the pension investment fund will depend on a number of factors including investment returns, which are not guaranteed. Past performance is not necessarily a reliable guide to future investment returns, which may be higher or lower than assumed. The value of your investment and the sum you originally invested are not guaranteed. All company pension plans are required to be approved by the Revenue Commissioners and registered with the Pensions Board. Noel Hackett is a tied agent of New Ireland Assurance Company plc for life and pensions business. New Ireland Assurance Company plc is regulated by the Financial Regulator. A member of Bank of Ireland Group. Bank of Ireland Asset Management Ltd is authorised by the Financial Regulator under the Investment Intermediaries Act, 1995. *** The material in this document is for information purposes only and does not constitute an offer or recommendation to buy or sell any investment or subscribe to any investment management or advisory service. Warning: the value of your investment may go down as well as up.