Transcript

Enda Brady: Good morning, everybody, and thank you for joining us. It’s great to have you with us this morning. My name is Enda Brady, Certified Financial Planner and co-owner of iQ Financial with my brother, Coman. You’re all very welcome.

Today’s session is called Pensions and Tax, a Business Owner’s Masterclass. And I’m delighted to say that we’re co-hosting this morning with Pat Ryan from Pat Ryan Pensions. Pat is a pensions consultant, and he advises financial planners and advisers around Ireland on pension legislation and all things pensions related. We’re delighted he can join us for the session this morning. Pat, you’re welcome. Thanks a million for helping us out.

Pat Ryan: Yeah, thank you, Enda, I’m delighted to be here this morning.

Enda Brady: So before we get started, some important housekeeping to help you make the most of your time with us. I’ll hand you over now to Maria Devine, our Senior Financial Planning Administrator and Office Manager here at iQ Financial.

Maria Devine: Hello, my job today is to keep things running smoothly, and I’ll also be reading out any questions you may ask. The way you can get involved is by clicking the Q&A button on your screen, where you can type your questions. Just to let you know, the questions and comments that you write in the Q&A, they’re not visible to everyone, only the presenters and myself can see them. And we’ll read them out at the end. You can choose to submit questions there anonymously as well, if you wish. And also, only the presenters can see the full list of attendees. Other attendees can’t see each other’s names. If we write any comments in the chat, then they are visible for everyone. We’ll answer any questions at the end. We want everyone to have their questions answered.

I will put a couple of links in the chat on our iQ Financial website, where you can access our guides for business owners, and where you can book a Learn More call, or you can sign up for our monthly newsletters for business owners.

After the webinar, we will send a follow-up email of this recording of the session with the slides and the links to the guides for our business owners, so if you miss anything the first time round, you can catch up later. Now I will hand back to Enda to get started. 

Enda Brady: Thanks, Maria. Just briefly for those who may not know us, at iQ Financial, we provide financial planning and investment management to business owners and professionals. We work with owners who want to sell, retire, or make work optional in the next five to ten years.

We look at your overall financial situation and help you plan for retirement, reduce taxes, provide for your family, and invest wisely. www.iqf.ie is the best place to learn about our business.

Over the next 30 minutes or so, our goal is simple. It’s to help you get maximum value from this Masterclass. And more importantly, take action. Pensions can be complex, but the key is knowing what applies to your household and your business and what steps to take next. We’ve put together five questions for you to consider.

Just on the next slide there, Maria. So, these five questions, you can, let’s just give a few seconds, so you can take a photo of this slide, or maybe make a note of them, and as we go through today’s session, we’ll cover each of these areas and help you understand how they relate to your own circumstance, so that you leave with some practical value. You get greater clarity on what you may need to do for your situation, and you have confidence about what your next steps should be. 

So, the five questions we want you to consider for your own situation are:

1. Do you have a pension, and do you fund your pension from your business?
2. Do you understand how much you can contribute to your pension? How much you can put into it? And do you understand how you can withdraw funds and spend your pension assets in the future?
3. The third question for you to consider is, are you maximizing your pension opportunities for your spouse? Or your life partner and children who may work in the business with you and using your business.
4. Do you know the amount you need in pension assets and other personal assets to make work optional for you?
5. And finally, do you have a retirement income strategy? Looking at your personal assets overall, do you know how and when you’ll be able to take the cash flow and income you need to do the things you want to do when you want to work less or not at all?

As we as we go through the content today, hopefully, this will become clear for you, but there are five questions for you to consider. We’re going to break the session down, into three overall parts.

The first, section, I will go through these first three points here. This is what we’ll share with you today. I will cover:

1. Which pension arrangements or pension accounts you could have as a business owner, and why it matters which account you have. 
2. I’ll talk briefly about something that isn’t talked about much, your state pension, and what you are entitled to, and how important it is for business owners. 
3. And I’ll touch on what happens to your pension when you die.

Pat will then take over and Pat will show a couple of illustrations around showing you how tax efficient it can be to have pensions as part of your personal family balance sheet. And he’ll look at:

1. How you can use a pension to help you extract wealth from your business tax efficiently. 
2. We’ll also look, and Pat will share an example on the pension cap.

That’s the maximum value you can have in all of your pensions pre-retirement. So, he’ll have a look at that and also how you might plan drawing down or spending your pension assets in the future. The third and final section after that are some common questions that Pat regularly gets around the country, and we’ll also have time for a live Q&A at the end.

And we have two offers for you, before we finish. 

So, the first thing we want to share with you are the three main pension accounts available to business owners.

You can have a thing called a PRSA. It’s a personal retirement savings account. You can have or be a member of a Master Trust or an occupational pension scheme.

And you can have a thing called a personal pension, which in law is referred to in pension legislation as a retirement annuity contract (RAC). For the vast majority of business owners today, the PRSA and the Master Trust will be the most common options, the most common accounts that you will use in the future. So I’ll just share with you the very key parts of each of the three of these accounts you may have as a business owner.

1. A PRSA is a flexible pension account for self-employed individuals and company directors. It’s owned by you. You own your own PRSA. It’s easy to manage. And it can move with you as your circumstances change. So, if you close one business and open another or you move through different parts of your career, you can bring your PRSA with you easily. Company or business contributions can be made without what’s called age related or age based funding limits. In simple terms, there’s a lot of flexibility about how much you can put into a PRSA, up to your maximum yearly salary in any given year. And you can take money out of your PRSA, you have flexibility there too, at any time in your life between the age of 60 and 75.
2. The second account or the second option for business owners is a thing called a Master Trust. If you have pensions, you will be aware that previously held occupational pension schemes or previously held self-administered schemes have evolved and moved on, and there’s a new structure for those accounts now called a Master Trust. So, a Master Trust is designed both for you as a business owner, but it’s also designed for employees of the business. It allows company or business contributions from your business bank account. And personal contributions can be made into the pension. And there are some additional planning opportunities. There are some additional opportunities for business owners that we’ll touch on. It’s overseen by professional trustees. So it is a trust or a scheme, and professional trustees manage it for you.
3. The final of the three accounts just to share with you is a thing called a personal pension. This traditionally has been popular with self-employed individuals and sole traders. Many personal pensions were set up before PRSAs became more widely available, and they’re still commonly held today. A personal pension is simply a type of pension account that is only available through an insurance company. It’s very similar to a PRSA. One big difference is you have to have a salary if you have a personal pension. You don’t actually have to have any salary to be allowed to open a PRSA. But when you see personal pension, you know it’s a pension account from an insurance company.

So what’s the bottom line here? So just in summary, what pension account should you have as a business owner, and why is it important? So, the bottom line here is first start with a PRSA. It’s the simplest and most flexible option. And then when you might need it through your career, you can also have in addition, you can have a Master Trust as well. The reason you would have a Master Trust is if you are in a situation where you need to make a special contribution to catch up for years when you weren’t in a position to contribute to your pension, or in any individual year where, for whatever reason, you want to make a contribution into your pension that’s larger than the salary you’re taking from your business in that calendar year. Then you can use a Master Trust as well.

The second thing just to say to you, which is really important around which pension account you use and how you start to think about pensions, is make sure you make your pension lodgements or your pension contributions are through your business, not personally. If your family members work in the business, if your life partner or your children work in your business, consider pension and consider funding pensions for them also.

And finally, you you’ll see other webinars and guides that we’ve used about, tax planning and potentially more complex tax planning like things like holding companies, but certainly focus on building family wealth through pensions first and maximize your opportunity there before you add

some of the more complex tax planning options that are available to you. That’s the bottom line in relation to the pension accounts. 

I’m just going to share with you a little bit of information now on the state pension, and also on what happens to your pension when you die.

The state pension is probably one of the most valuable retirement assets that is not really talked about enough. It is potentially worth, potentially worth up to 700,000 euros for a couple over their retirement. There are opportunities to improve the amount of PRSI credits, our parents used to call them stamps, so the State Contributory Pension provides you with a benefit at the moment, it’s 15,563 euros per year, and we’ll look at the budget next week, it may have increased, but, there are opportunities if you sell a business and there’s a gap in your employment, or yourself and your wife were in business and you move on to another business and your wife potentially stops working earlier in life, there are opportunities to make voluntary contributions and buy additional credits in the system for up to 4 years from the time you may have stopped working. 

You can also get additional credits at the time you apply to get your State Pension, which currently is at age 66, if you had some time out of your career spent caring for young children.

It’s important to say that we’re in the second year of this since 2025, the way they calculate how much of a State Pension you’re entitled to is gradually moving from what’s called a yearly Average Method into what’s called a Total Contributions Approach. And under a Total Contributions Approach, every PRSI contribution counts. So checking your record has never been more important.

For most business owners, understanding your PRSI position today could significantly increase your retirement income tomorrow.

Finally, for my bit, before Maria has a reminder for you and we move over to Pat, what happens to your pensions when you die? So one of the biggest pension planning questions is understanding what happens on death. Before retirement, the cash value of your PRSA passes to your estate. While a Master Trust depends on the scheme rules, the trustees, and what beneficiary nominations you have elected to make.

After retirement, so you’ve taken some tax-free cash out of the amount you have accumulated in your pension account, and you’re drawing the balance down of that money as an income. After retirement, any tax-free cash you’ve taken from your pensions forms part of your estate, and is available to your estate, as you would assume. If you have a thing called an ARF, which is after you take tax-free cash in retirement, you’ll have the option of taking a thing called an ARF. Or using the capital you have left to buy a thing called an annuity wage as an income for life. 

If you have an ARF and you pass away, your spouse takes your place as the account holder in your ARF. And your spouse can continue to access an income from the ARF in the same way you would have been doing. So if you used your capital in retirement to buy a thing called an annuity, they generally stop after an initial guarantee period from the start of when you get an annuity. So if you had a five-year guaranteed annuity and you, God forbid, passed away after three years, the annuity would pay out the remainder of the two years of the guarantee period and then stop.

The PRSA is the most straightforward here, again, folks, in terms of planning in later life, you’ll have a little less control with the Master Trust. And in many cases, we, you know, we expect that both a Master Trust and a PRSA will be availed of by our business owner clients because both of them will allow your estate to access the pension assets you have not yet spent.

So, folks, that’s quick key points around Pension accounts you can have, points around a reminder, very importantly, around the state pension, and also we’ve touched on there, what happens to your pension when you die. So, I’ll just pause there for a second, and before we move on to Pat, there’s just a reminder from Maria.

Maria Devine: Okay, so the reminder is just that the questions and comments you write in the Q&A are not visible to everyone. Only the presenters and myself can see them, and we’ll read them out at the end. And you can choose to submit a question anonymously if you like. So please do go ahead and type in any questions that you have. If we write anything in the chat, there is visible to everyone, and you can see the links that I’ve put in there to our website.

If you want to talk to about any of the topics with iQ Financial in more detail, you can send us a message in the Q&A, and we can set up a meeting for you, or you can click the link in the chat to book a Learn More Call. Okay, I’m going to hand back to Enda.

Enda Brady: Thanks, Maria. So, Pat, we’re going to talk a little bit about an example as to how to extract funds tax efficiently from a business using a pension and maybe talk a little bit about how we how we might plan a pension cap if we’ve if we’re in good shape and we have a lot of value in in in our pensions in later life.

Pat Ryan: Sure, Enda, absolutely, yeah. And I think you touched early on there, on, I suppose, the whole structure of, kind of, moving assets from the business onto the family balance sheet. And, so, I’d just like to look at that now, just maybe an example or so as to how this works. 

Just taking a typical example here, I’m calling it low priority employer funding. And so you’re just looking at, say, a business owner who has the ability, say, to take 200 grand out of the business this year, basically to translate into his own assets.

Now, you could say, typically, maybe the first hundred, you’re going to need that anyhow, for salary, for kids, education, keep everything going. So that’s fine, that’s ordinary salary. And maybe the second hundred grand, then, is to try and boost your own assets.

So, just looking at an example here, this particular example I did before for a legal practice, and so you’re kind of saying, well, to pay an extra 100 grand salary here, it’s going to cost the practice over €111,000, including employer PRSI. If you’re on Class S, you mightn’t actually pay that, but still, there’s 100 grand, or between €100k and €111k coming out of the company.

Now, the business owner themselves, so there’s 100 grand gross coming out, but they’re going to pay PAYE of 40%, USC of 8%, PRSI of between 4 and 5%, depending on what you’re at. So, you’ve got net assets for investment here of over 47,600. So that’s kind of that’s what’s gone on to the family balance sheet.

So, Maria, if we might just move on to the next then, and I suppose this is what I would call, maybe, higher priority employer funding here. So this time, we look at the second €100k, say, of gross salary that might be available, but instead of taking it as salary, we transfer that, and if necessary, the kind of corresponding employer costs. So there’s €111,000 here, but it’s not going into salary, it’s actually being received gross by the business owner’s own pension fund.

So basically, the gross assets here now in, as I say, in the Master Trust or the PRSA, there’s now, €111,000 and that’s available for investment and it’s available for investment in gross funds.

So, Maria I suppose, if you just move on there. What we’re really looking at here is, Enda talked about, how to maximize, transfer of assets from the business to ourselves. Well then, kind of, if we do it through low priority, you might say salary, where we’ll take it out of salary and then invest it, well, we’ve got €47,000 to play with. Here, if we do it into our pension fund, where it leaves the business with nothing coming out of it, we’ve got €111,000.

So, really, I think, as Enda said, one of the points of today is just it’s perhaps time to check and see, can we structure, the transfer of assets into our own personal balance sheets in a better way?

So, Maria, if I can maybe move on here. And yeah, so you might say, kind of How much? Can I do this? Can I do a few hundred grand every year? You know, can I put millions into this? Or where does it stop? And, so, I suppose you might say 20, there used to be no limits on this 20 or 30 years ago, limits came in and, now for the first time in over 20 years this year, we’re seeing the actual, what we call, pension caps increasing.

Now, pension caps, I mean, they’re not absolute caps, but it’s the amount where the transfer is most efficient. So where we stand at the moment, we have what we call a Standard Fund Threshold. And that basically is an amount that could go into the pension plan when it goes over that amount Revenue kind of say, well, hang on. We’ve given you a lot of tax breaks on this already, and if you put too much in, we’re going to try and toss some of those back.

So, as I say, up to the start of this year, that amount was €2 million per individual. It’s gone up by €200,000 this year and will continue to go up for the next few years. If you go over that, there is a kind of a tax clawback, and it’s called a Chargeable Excess Tax. It’s currently 40%, but again, it may decrease in future years.

But so what I might do now in the in the next slide or two is we’ll just have a look at actually how that’s working.

So, as I say, currently, it’s €2.2 million. Next year, it’ll be €2.4m, in 2028, it’s €2.6m, and by the time we hit 2030, it’ll be over €3 million. And, so that means that I could, if I was looking at planning, let’s say, to access my funds around the year, say, in 4 or 5 years’ time, I’m looking at having a fund of €3 million that is purely, tax-efficient. So, basically, as I say, it applies when I draw down my funds first. I don’t have to use it all at the same time, but basically, if I draw down half my funds this year, well, the increase will apply proportionately to the balance of funds is left into the future.

I can also take lump sums, from my pension, and when I do that, I will sometimes, if I pay if I take over €200,000, there’s a lump sum tax. But again, if I pay that lump sum tax, it acts as a credit against my total Standard Fund Thresholds. So actually increases it further.

So, if we just move on here, we might, actually have a look at an example here. So, we’ll take a business owner, Teresa, and she’s targeting, kind of accessing her pension funds in four years’ time, say, around 2030. So, at that stage, it means that Theresa would be allowed have up to €3.15 million in her funds, and so that’s based on the fact that the fund threshold will be €3 million, and that she hasn’t previously taken drawdowns. So, if that were the case, Teresa’s plan might be, I’ll take my maximum tax-free lump sum out of that, that’s €500,000. She will pay a little bit of lump sum tax on that, that’s €60,000. But what that will do is that will actually act as a credit then for her Standard Fund Threshold. So basically, she will have a Standard Fund Threshold available of €3.15 million. So she takes her lump sum, pays her lump sum tax, and then she’s got a €2.65 million left, and this can be transferred into Teresa’s Approved Retirement Fund.

So, Maria, if we just have a look at this now. Teresa is, say, age 60. And, so, she’s got €2.65m in her retirement fund. Because she’s got over €2 million there will be a Revenue requirement that she takes an income of 6% per annum for it. That’s nearly €160,000 a year. So basically, she takes an income, a taxable income or pension of €160 grand a year. The remaining funds remain in her ARF. They continue to grow tax free.

If she dies, the ARF may transfer in full to her spouse, and now it’s his ARF, or alternatively, her adult children may inherit, again, the remaining gross funds, subject to a ring-fenced death tax basically of 30%. And that doesn’t interfere with their normal inheritance tax level.

So these are very real assets. And, that’s just kind of a fund that just continues on the family balance sheet.

So if we can just move on, then you say so. That’s effectively kind of the Standard Fund Threshold. And but you say, well, can I actually go over that? Or, you know, as I say, that’s basically a kind of clawback that the Revenue have in place. But just let’s say, if we just look at another example here, and we say Teresa has done actually better, and instead of having €3.15 million in her funds at age 30, she has an extra million. She’s €4.15m. So, what Teresa can do now, if she still doesn’t want to pay this, Chargeable Excess Tax straight away, she can actually split her funds. So, she splits her €4.15m into €3.15m, like we had in the last example. And then she has a second PRSA for €1 million. So again, she wants to draw down her first PRSA at age 60. So she takes her lump sum of half a million. That’s a net €440 grand in cash. And she transfers again the €2.65m into her ARF. She doesn’t pay any Chargeable Excess Tax at all.

So just move on, Maria, please. And so then we’re kind of saying, well, okay, so that’s she’s dealt with her PRSA one as before, but she now has a second PRSA with €1 million in it. So, as I say, Teresa’s getting €160 grand a year for the first one, so she’s quite happy to keep PRSA2, to just keep it invested. So she has the option of leaving that PRSA fund, invested, say, for a further 15 years until she’s 75. She doesn’t have to take any income from it. It continues to grow tax free. And say, for instance, if it grows at 5% per annum net for this period, well, then the value of this PRSA at age 75 will actually be over €2 million.

So then, she does have to pay the Chargeable Excess Tax, and the Chargeable Excess Tax will be twice as big. It’ll be, over €800,000, but she has now an additional fund of €2 million to pay it. So she pays her excess tax, and she still has a transfer of nearly one and a quarter million extra into her ARF. So excess Chargeable Excess Tax isn’t all that bad, particularly when you’ve got tax-free growth to actually pay for it.

Enda Brady: Pat, thanks a million. And we’re always trying to pitch these webinars on the basis that if somebody knows very little or somebody knows everything, they will get value out of it. Just, that was very helpful, and I know we’ll talk about two or three questions you get from advisors around the country, and I’m conscious of giving people time to ask questions live, too, and that it’s half 10. So look, guys, we’re getting into the questions part of this now. So, you know, by all means, please stay, if you’re under pressure for time, we understand. I imagine we’ll be ten or fifteen minutes here going through some questions with Pat.

Pat, just in in the new world of the pension cap, the maximum amount you can have in your pension before you retire. In the new world that it’s changing now this year up to €2.2 million, in January 2027, it’ll change to €2.4 million, right? So, if I retire on the 31st of January as an example, one month in, the cap applies regardless of the of the time of year I retire. Can I, early on in 2027 I can avail of the €2.4 million if required?

Pat Ryan: Absolutely. So if I was planning, let’s say, to retire on the 30th of December, I might well leave it for a couple of weeks until January and there’s an extra 200 grand to pay.

Enda Brady: And just to hammer home the point a bit, the example you used about it, if things go particularly well and you’re over a particular pre-retirement cap for pensions, because I always call it a pre-retirement cap because if you build up a million quid in your pension and you take a quarter of it under the tax-free or tax-reduced lump sum, and you put the balance into a thing called an Approved Retirement Fund that you can continue to draw down on, depending on how long you live, and depending the ARF has to be protected and invested wisely, but the ARF can grow uncapped. There is no cap on the value you can have in your ARF. It’s just kind of to say that bluntly.

Pat Ryan: Yeah.

Enda Brady: Absolutely.

Pat Ryan: The cap, or the threshold, as we call it, is only kind of a valuation point, and that’s at the time when you trigger it. And, as I say now, because you could split your pension, you could have 4 or 5 different parts. So, it’s only the part you trigger that’s actually counts as the cap.

Enda Brady: Once you start taking money, in general terms, folks, you can access pensions from previous employment from the age of 50, but you can continue to work and continue to contribute to pensions and access an existing pension from the same employment from age 60. So you can be accumulating pensions pension assets and drawing them down from age 60 and then continuing to work in your own business. And separately drawing down your State Pension from age 66. So I’ve tended to phrase that, Pat, that the cap you can have is a pre-retirement cap in my mind. Yeah. And just to hammer home the point that that example you have used about splitting up the values so that you don’t pay Chargeable Excess Tax early is specifically a feature of having PRSAs. Like, you can split them. You own them and you can split them up easier. You can’t do that with Master Trusts.

Pat Ryan: That’s correct. And that’s why a lot of individuals when they think about this, really, you’re saying, even if your funds are in a Master Trust, you might say, well, look, I’m planning maybe to retire, let’s say in three months’ time. But I believe in the Master Trust, I have to trigger everything together, so what I will do is, let’s say now, three months beforehand, I’ll actually close my Master Trust and transfer it into 3 or 4 different PRSAs. You know? So, kind of the planning, the Master Trust can help accumulate funds quicker, but, when it comes to planning, start the planning a little bit before you pull the trigger.

Enda Brady: We’re sort of without showing the slides here, Pat, we’re sort of touching on regular questions you get. I think what we might do, Maria, is that we’ll just in in one minute, we’ll come to questions that people have asked in advance, and I see there’s a few questions in there as well, 

But we have two offers for you, and I just wanted to tell you about the first offer, folks. Just, I don’t know if you can put up the link there, Maria, for the Take Action Call, if you have that, please. Yeah, thank you, Maria. So look, folks. The information we’re sharing, and we’ll do some more questions now with Pat. But the information, it won’t change, you know, your outcomes unless you take action. So just every attendee today, we are offering you a complimentary Take Action Meeting available in the month of October, and our commitment, that’s a free consultation. Our commitment in that meeting is that we’ll help you fix at least one of the financial areas you might need addressed, either in what we’ve discussed today, or any other query you might have in terms of helping you and your business to build your personal assets. You can either click on that booking link. And we’ll just give you a few seconds to do that. Now, you can either click on that booking link that Maria is showing there, or if you don’t want to fiddle around with Calendly, if you simply email enda@iqf.ie with the word ‘action’ in the subject, if you do that we’ll be back to you and we’ll give you some time to help you solve a problem or progress a financial matter, that’s available to you in the month of October. 

There is one other offer for you, and I’ll share that, you know, with you at the very end. 

So we’ll deal with the questions we got beforehand and some we’ve got live now, Maria, if that’s okay.

Maria Devine: Okay, yeah, so we had a couple of questions sent in when people registered, so thank you for doing that. The first one was from Edward, who asked about information on setting up a self-administered pension.

Enda Brady: So in my mind, Pat, there’s no such thing as a self-administered pension anymore. We have a thing called a Master Trust and a PRSA, which is the predominant two accounts. Thank you very much for the question. It mightn’t be related to bricks and mortar, but, sometimes in the past, when we’ve got questions about self-administered pensions for people who wanted to invest in bricks and mortar property through their pension. You can still do that if you want to use property assets in your pension, you can use a PRSA and a trustee for that and have property if that’s an important investment criteria for you. There’s no such thing as self administered. I don’t know if you want to add to that, Pat.

Pat Ryan: That’s really it. And yeah, I mean, let’s say, a few years ago you could borrow to buy property and all that through a self-administered pension fund. Basically, the Pensions Authority kind of didn’t like that really, and so it’s much more difficult to do now, but basically so that there’s no borrowing or anything like that. But if I mean and there’s different rules, let’s say if you buy a property through your pension fund, you can’t use it yourself, you can’t rent it to your business, or to relations or anything like that. So, but certainly, I mean, if it’s an arm’s length property investment, with no borrowing involved, and you have enough liquidity in your fund, it certainly can be done, via bassically, you try the PRSA first, and you might need maybe a Master Trust as well, but as I say, it still can be done, but it’s just, kind of more cumbersome than before.

Enda Brady: And the word self-administered I touched on it briefly. If a business is contributing to a pension, previously, the business owner could be one of the stated trustees on that account, and that’s been done away with. So if you have a PRSA, you’re the owner of it, but the other option for pensions that can receive money from a business on behalf of the owner of the business or the employees of the business, the new occupational scheme is now just called a Master Trust. And there’s separate professional trustees for that. The self-administered is no longer an option.

Enda Brady: What’s next there, Maria?

Maria Devine: Next question is from Victoria, and it’s two parts. The first one is, what are efficient ways of investing the lump sum? And then, can someone retire from their job and collect state pension while still working as self-employed?

Enda Brady: I’ll let you do the second part of that, Pat. Victoria, thanks a million for your question. The efficient investment of money is very much based on a couple of factors that are personal, you know, to yourself. So depending on how much you need and depending on how long you have to invest and depending on how much money you set aside for emergencies because we always have to plan for the recessions we tend to get every couple of years in 10. So, I’m not trying to fudge you and say it depends, but what we’ll direct you to is that we have an investment guide on our website, which we will send to you, and we’ve done two webinars, recorded videos, if you want to look at the content in that fashion about how to think about investing your money full stop, be it inside a pension or outside a pension. And separately, in addition to that, if you want a quick call to discuss your situation or if there’s a lump sum coming, we can help you with that. In blunt terms, don’t invest money in the absence of a plan. Don’t invest money unless you have emergency cash to plans for the unforeseen. And as much as possible, try to put money away that you don’t think you’ll need to spend within ten years, and we can help you get on top of that. But, I hope that’s okay, Victoria. Pat, the second part to that question, Maria, was can you leave your job and what? Sorry.

Maria Devine: Could someone retire from their job and collect state pension while still working as self-employed?

Pat Ryan: I think the answer is absolutely. And the State Pension, you just really have to hit age 66 and have enough contributions, as Enda mentioned, and but basically, you can build another private pension as a self-employed person. You know, there’s no issue with that at all. Totally removed from the State Pension. So kind of no crossover there to worry about.

Enda Brady: And that’s I know in some of the some of the detail you sent us beforehand, Pat, that’s kind of in the area of the type of questions you get that, you know, after you turn 60, if you’re working in a business, you can continue to work in the business and access the pension you’ve accumulated from that business, as we have said. And you can actually continue to add new contributions depending on your overall cap for your retirement.

Pat Ryan: And that’s where, as you say, the PRSAs have really freed things up there. That basically the PRSA, as you say, is owned by yourself.  It’s actually your asset, and you basically just need to hit 60 to trigger it, or if you know if you’re in employment and your employment ceases, you can trigger it earlier from age 50. But basically, just because you’ve taken some doesn’t mean that you can’t continue to contribute to a different PRSA, and you know, so it’s very, very flexible. And that works all the way up to age 75.

Maria Devine: That’s great, thank you. We’ll move on to the live questions now. So, we’ve got one from Anthony. Can you contribute to a PRSA and a Master Trust in parallel from business funds, or is a PRSA only from personal funds?

Pat Ryan: I think the answer is yes, and certainly in some situations, we kind of certainly advise you to do that, yep. And as you say, the Master Trust is a good way of catching up, but you can catch up with that and still do 100% salary instead into a PRSA. So certainly, yes, but kind of need to take a little bit of advice on the salary.

Enda Brady: Thanks for the question, Anthony. If you earn €50,000 in a calendar year, you can put €50,000 into your PRSA, and there are some calculations to be done to make sure you know the maximum that you can put in. But long story short, you can also have an additional Master Trust, where you can put in different years more than the yearly salary you have. And some calendar years, you might actually have contributions to your PRSA and your Master Trust in the same period. Yeah, there’s calculations. You need to be told the maximum you can put in to catch up for previous service or to make a special contribution into your Master Trust, so there is a calculation there. But, yeah, we’re expecting lots and lots of business owners to have both a PRSA and a Master Trust. And you can fund both from your business bank account, we’re advising you to do so and not do it personally.

Pat Ryan: Not you personally. Yes.

Maria Devine: Okay, that’s great, thank you. The next question is referring back to Pat’s example, where €100K became €111K, and just asking to explain how that worked. Was it employers PRSI, and what would happen if it was directors’ income?

Pat Ryan: Yes, that was a particular example where you had a non-proprietary, I suppose, partners, really. It was, like, non-proprietary partners in a limited legal practice. The difference there, if I was doing this, say as, as a proprietary, in my own business, as a 15% plus shareholding director, in that case, then, the €11,000 wouldn’t be there because the company would not be paying employer PRSI on mine. So in that example there would be €100 grand coming out, and €100 grand being invested.

Maria Devine: Another question is, what age can you retire at from your business and draw down a pension from an ARF? Do you need to actually stop working in your business?

Pat Ryan: I think essentially, once you hit age 60, you can access PRSA benefits at any time, and you don’t have to stop working. A little bit like the example earlier there, it’s not tied into the State Pension or anything like that. You just have to hit age 60. In a Master Trust, it’s only if you want to access before age 50. There are certain conditions, like you actually have stopped taking salary, and sold your shares. But basically, over age 60, no issue, and just what I would say, sometimes at age 60, you might transfer from the Master Trust all into the PRSA, so that it’s no longer linked to the actual employment, it’s linked to yourself.

Enda Brady: If you sell your shareholding in the business in your fifties, so you can access pensions from previous employments in your fifties, so you could access a pension in your fifties that you accumulated when you were in the business, if you left the business or it was sold.

And let’s say you took your tax-free cash, and you didn’t buy an annuity with the balance, you put your money into a thing called an Approved Retirement Fund. You don’t actually have to start drawing down, let’s say you retired at 50, sold your business, and you accessed your tax-free cash for whatever reason at age 50, you don’t actually have to access your ARF until the calendar year, you turn 61

Pat Ryan: That’s right.

Maria Devine: Lovely, thank you. And the last question we have in here from Justin, I think it’s about an ARF on death. After the 30% tax for offspring, is it paid to the offspring in cash, or does it stay in the fund?

Pat Ryan: This is where an ARF holder dies, yes, and let’s say adult children

Enda Brady: 21 or older, yeah.

Pat Ryan: Yes, basically, the adult children receive it in cash.Because, the ARF ends there. The ARF can be transferable gross to a spouse only. But as I say, adult children inherit the proceeds of the ARF, less 30%, which, again, is better tha, the 33% inheritance tax.

Enda Brady: And it doesn’t affect the separate 33% inheritance tax threshold.

Pat Ryan: It doesn’t, no. It’s a kind of a ring-fenced ARF tax. So let’s say, if my son or daughter inherits my ARF, yes, they’ll pay, 30% on that, but they will still have their full €400 grand each, or whatever inheritance threshold tax, in respect of any other assets that I might still have.

Enda Brady: Thanks, Justin.

Maria Devine: That’s the end of the questions.

Enda Brady: Folks, just finally, I decided for those who stayed until the very end, you better put up the slide, Maria, because my book isn’t showing as cleanly on this camera as I thought. Folks, look, thanks a million for your participation today. If the first five people, we’re getting really marketing now like the Americans. The first five people who email enda@iqf.ie with the word ‘book’, we will send you this. It’s called Die With Zero. It’s a book from a fellow called Bill Perkins.

Getting all you can from your money and your life. Where we find books that we, you know, believe in, the vast majority of them we send them out to our clients. And we’ve done it a couple of times. We’re probably going to send out a third one now shortly. But many of our clients have come back and said that they got a lot of value out of this book in terms of how you think about money, how you plan for your money in your business, and how you plan for your money personally. So as a thank you for staying till the very end, seeing that it is 51 minutes past, and I thought we’d be finished at 40 or 45, as a thank you for staying to the very end, the first five people who email me, the word ‘book’, we will, give us a few days, but we will send that out to you.

Folks, listen. Thanks a million for sticking with us. Pat, many thanks for helping us this morning and sharing your knowledge. It’s really appreciated, Pat.

Folks, if you have any feedback on this webinar or if there’s anything financial you need to discuss, as we’ve said, you can contact us through www.iqf.ie. We’ll be hosting another webinar in November and we’ll keep you updated. We’re also expecting an important budget announcement next week on a new investment account that surely will create some opportunities for business owners and potentially everybody else. So, we we’ll share details as soon as they’re available on that initially through LinkedIn. Folks, thanks again for joining us, and goodbye.