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Auto-enrolment, scheduled for implementation in 2024, will introduce a State-run workplace pension plan for non-pensioned employees. This scheme is co-funded by both the employer and the State, offering a new retirement savings solution.

This blog post aims to simplify the complexities of auto-enrolment and pensions, offering a comprehensive guide tailored to the needs of employers and employees alike. Under this new retirement savings scheme, employees can only have one pension pot, meaning they must choose between auto-enrolment and a private pension; they cannot run both simultaneously. Whilst the final date is due to be announced early in 2024, it looks like the scheme will finally be enforced on companies in the latter end of the year. Auto-enrolments introduction in 2024 represents a significant shift in how retirement savings are approached, offering both challenges and opportunities for employers and employees alike.

Eligibility:

People who do not have a pension scheme, earn more than €20,000 per year and are aged between 23 and 60 will be automatically enrolled into the new system.

People outside of this range will not be automatically enrolled but will be able to opt in.

Employees already contributing to an occupational pension scheme, or an equivalent scheme, will not be automatically enrolled.

Options for Employers:

Employers are presented with two primary choices regarding auto-enrolment:

1. Opting for the State’s AE Model: This involves facilitating the rollout of the government-mandated AE plan within the company.
2. Adapting an Existing Plan or Initiating a Plan: Employers can choose to initiate a pension or modify their existing pension plans to become AE compliant, effectively creating their own AE model which is much more flexible.

Choosing the Right Option:

Several factors should influence an employer’s decision:

• 1. Tax Bracket: Higher earners may find a standard workplace pension plan more advantageous due to higher tax relief than the State’s AE model.
• 2. Flexibility: The ability to pay more or less than the mandatory amounts set by the State for AE.
• 3. Financial Advice: The State’s AE model, will not provide financial advice which is best practice and crucial in helping members to make informed decisions.
• 4. Early Retirement: There will not be any ability to draw your pension through the States Auto Enrolment model before the state pension age of 66.
• 5. Gender Parity: Women, who often experience career interruptions (e.g., maternity leave), may find standard pension plans more flexible for additional voluntary contributions.

How much will it cost?

For every €3 that an employee contributes, the employer must also contribute €3, while the State will contribute €1.

The contribution rates increase over a 10-year period, starting at 1.5% and capping at 6% of the employee’s net income.

What does it mean for employers?

For employers, Auto Enrolment implementation requires careful consideration. They must balance the financial implications with their employees’ needs, choosing between the State’s AE model and adapting existing pension plans. Employers face the challenge of managing additional costs, compliance, and providing support and advice to employees.

Most large employers in Ireland have existing pension plans in place, so may feel they will not be impacted by these changes. But often membership of these plans is voluntary, meaning that not all employees have become members of the plan.

Therefore, employers will need to decide whether to open their existing plans up to all employees to auto-enrol all non-members to their existing plan, or to instead allow for the auto-enrolment of non-members to the new state auto-enrolment system.

Smaller employers will also need to decide if they should enter the state auto-enrolment system, or obtain a flexible traditional occupational scheme which affords generous tax relief.

Conclusion:

Auto-enrolment is a progressive initiative aimed at improving retirement savings for employees but it very inflexible. Getting financial advice ahead of being Auto Enrolled is vital. Employers must carefully assess their options and consider their employees’ needs and financial situations when choosing between the State’s AE model and adapting existing plans. Employers will also have to be prepared to advise employees on how the scheme will operate, including details on eligibility, rates and increases.

Let’s talk about the new pension rule in Ireland. As a business owner in Ireland, it is crucial to understand the changes in pension regulations that affect your employees and your company. Planning and saving for your financial future include staying updated on the latest finance laws and bills. The latest finance bill, which came into effect on January 1, 2023, has brought a new opportunity for you to do just that.

In this article, we will explain the new pension ruling on benefit-in-kind (BIK) tax on employer contributions to PRSAs (personal retirement savings accounts), which allows business owners the opportunity to make larger pension contributions for their retirement savings. we will explore the latest pension regulations, what they mean for your business, and how you can comply with the new requirements.

Financial advice helping you contribute more to your pension scheme

The New Pension Rule Explained

Up until now, if you were a company director, you could make employer pension contributions directly from your company to a company pension in your own name. However, the amount you could contribute was limited by your salary and the number of years of service in your company. This often led to directors taking higher salaries than they needed to fund their lifestyle just to justify large pension contributions.

The new rule means that you can now make employer pension contributions directly from your company to a personal pension, without the contributions being subject to benefit-in-kind tax. This change is expected to reduce the incentive for company directors to take higher salaries than they need in order to justify large pension contributions. The maximum pension fund limit of €2mil still applies, but it will no longer be tied to a specific salary or years of service.

By taking advantage of this new rule, you can make larger contributions to your personal pension account, which will ultimately lead to a larger retirement fund. It also allows you to save money on taxes, as you will not be subject to BIK tax on your employer contributions.

Example 1: Limited Business Owner

Michael, 60 years of age, has a Limited company. He invoices c. €200,000 into his company and draws a small salary of €10,000 as he has other income and assets to sustain his lifestyle. Any further income in his name will be taxed at 52%. The cash has been building up on deposit in his company for several months. It’s losing value to inflation and may be liable to corporation tax at year-end.

In previous years, Michael would have been limited to an employer contribution of around €10,000.

With the new changes, in theory, Michael could now make an employer contribution of €190,000 (the balance of the cash in his business after his salary) per annum into a PRSA to extract the cash from his company that was on deposit. It’s now in a PRSA where it grows tax-free. That’s a win!

Let’s take the same example but assume that Michael already has a pension fund of €2mil and can’t contribute any more to his pension.

His wife Mary is a shareholder and director in the company, and she too draws a salary of €10,000. Mary has no pension funding to date and only joined the company last year. The company could make an employer contribution of €180,000 to a PRSA on her behalf each year, which is simply a different way of achieving the same benefit explained above.

Example 2 – Business Chain Owner

Mary, 35 and single, owns three hair salons as part of a chain. Each salon is performing well and cash flow is very strong. She thinks she could extract around €10,000 per month without putting the business at risk.
However, Mary only needs €40,000 salary per annum, as she doesn’t spend much and spends most of her time working. She does not want to increase her salary, as it will put her in a higher tax bracket.
 

Under the old rules, Mary would be limited to employer contributions of around €2,100 per month. As of now, she can set up a PRSA and will be able to contribute €10,000 per month without having to increase her salary.

How Financial Advisors Help You

Now is the perfect time to review your current pension plan and consider making changes to take advantage of the new rule. Talk to us to help you determine the best course of action for your specific situation, and to ensure that you are maximising your retirement savings.

The new pension rule for business owners is a significant change that could have a major impact on your retirement savings. Removing the BIK tax on employer contributions to PRSAs gives business owners the opportunity to make larger pension contributions and ultimately have a larger retirement fund. As a business owner, it’s important to take advantage of this new rule, and consult a financial advisor to ensure that you’re maximizing your retirement savings.

For more information, book a Financial Consultation with our experienced advisors today.

In this post, our lead Financial Advisor Nick Charalambous shares his insight and tips into why prospects will choose to become your customers. Even if your role doesn’t entail marketing or business development our end goal is always to attract new customers.

1. Their Experience with You
2. Your Product or Service Benefits
3. How to Build Trust and Reputation
4. How to Provide Value to Your Customers
5. How to Market Effectively

Their experiences with you

Your prospects will judge your worthiness based on how you make them feel. This includes how well you communicate, your content depth, your website’s quality, social media etc. They will also be more likely to engage in conversations with you when you allow them to interact in ways they prefer (e.g., some people may relate to a blog post while others are more engaged by video or audio content). 

One must always remember you are marketing to people first, so build the human bond by remembering personal details and listening carefully. All too often, I see businesses pumping out advertisement after advertisement with no connection to their audience rather than forcefully trying to shove their product or service down the consumer’s throat.

Your Product or Service Benefits

Basically, the reasons why people purchase anything is

• To increase pleasure which relates inadvertently to what we provide or b
• Decrease pain e.g. reliving financial problems.

Focus on your product or service’s most captivating & compelling benefits as you communicate with your target audience and then, make sure you deliver on your promises. Make sure to be specific.

How to Build Trust and Reputation

Look after your good name, and do everything in your power to ensure that your customers, prospects, friends, employees, and colleagues view you as a person of value. At Alpha Wealth we are a Dynamic, Progressive Financial Services company. With the common purpose of providing individuals, and companies, with a level of service and advice that they would not have been used to before. Keep in mind that your credibility and truthfulness will also win you far more customers than exaggerated claims and over-the-top promises. Hence why we offer a service which is free of charge and you are under no obligation to take our advice. This ties in with the fourth point.

How to Provide Value to Your Customers

Although most consumers are price-conscious, the vast majority do not consider price alone when making their buying decisions. Rather, they consider value: the difference between what something costs and its worth to the buyer. What does value look like in the social media world? Answer: great content, expert advice and personal connections.

The goal of our content is to show you the faces and people behind the brand in an interactive way. Currently, one of our employees is conducting a research project on the role of Corporate Social Responsibility (CSR) on social media to further improve our interaction with our audience. 

How to Market Your Services Effectively

Listen carefully to your target audiences’ expressed opinions and feelings. Particularly as they relate to your products or services—and be sure to address them directly. Social media marketing is not about quantity; it’s about quality. It is not just about long lists of followers. It begins with a sincere desire to grow and nourish genuine relationships and do whatever it takes to ensure they happen.

If you do this, the money will follow. Finally, don’t forget, for great advice on money management and how to plan for your financial future, you can avail of our complimentary expert advice today! Call us on (021) 2061783