Employers Guide to a Group Retirement Plan
Employers Guide to a Group Retirement Plan
01.01
Contents
O1.02
At a glance
02.01
Welcome to Thomond Asset Management
03.01
Helping your employees plan for a comfortable retirement
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04.01
Why Thomond Asset Management’s Group Retirement Plan?
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05.01
Extensive benefits for both you and your employees
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06.01
Designing your Group Retirement Plan
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07.01
Tax benefits
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08.01
Investment options
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09.01
Other Funds
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10.01
Retirement options
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11.01
Protection options
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12.01
Plan details and communications
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13.01
Frequently asked questions
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14.01
Next steps
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15.01
About Us
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
01.02
At a glance
Objective
A straight forward pension option for you and your employees
Cost
Competitive and transparent charges
Service
Tailored member service Online access to view plan for both employer and employees
Tax relief
Employer corporation tax relief of 12.5% on contributions* Employee tax and PRSI relief on contributions *
Investment
Trustee indemnity from member fund selection Wide range of investment funds and managers
Risk
Thomond Asset Management helps employers manage their risk through: • Trustee indemnity from member fund selection • Approved trustee training and support • Corporate trustee service to take responsibility for trustee role
Employee Retention
A company pension plan is a valuable employee benefit making your company an employer of choice
*Subject to revenue limits and approval.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
02.01
Welcome to Thomond Asset Management
A philosophy centred on client relationships. As one of Munster’s most dynamic Wealth Management companies, our aim is to provide our clients with greater financial independence, security, and peace of mind. To deliver on our commitment to growing your wealth in a progressive yet secure manner, we have assembled a team of dedicated and accountable professionals with decades of experience in all aspects of wealth management. Our highly qualified and experienced directors and portfolio managers understand that you‘ve worked hard to grow your wealth and that you need an organisation that understands your needs. When founded, Thomond Asset Management did not follow the path of our peers, a transaction-oriented style of business based simply on “selling”products. Instead we stress the importance of counselling individual clients,understanding their needs and concerns, and building customised financial plans.
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Today, Thomond Asset Management continues to embrace this philosophy,encouraging our clients to focus on long-term investing and develop diversified portfolios. Our objective is to help people plan for life. Remaining sensitive to the changing needs of our clients, we keep a watchful eye on today’s complex financial marketplace and we offer a comprehensive selection of wealth management solutions to help meet our clients’ evolving needs. We are dedicated to providing clients with complete financial planning services and personalised, professional assistance. Simply put, we believe our business is people and their financial well-being. Only when your specific expectations are met or exceeded do we consider our result a success.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
03.01
Helping your employees plan for a comfortable retirement
Important in attracting and retaining the best people
In today’s competitive business environment, employee benefits are becoming increasingly important in attracting and retaining the best people. A good pension plan can form an important part of any remuneration package in actively encouraging employees to consider a long-term future with your company. While there is a legal requirement to provide employees with access to some form of pension provision (standard PRSA), you are not required to make a contribution on behalf of an employee.
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Instead of just providing a standard PRSA facility, many employers are now taking the opportunity to set-up some form of company pension plan to help their employees save for retirement. There are two company pension plan options available to employers, a defined contribution Group Retirement Plan or Group PRSA arrangement, both of which are available from Thomond Asset Management This brochure will explain how a Group Retirement Plan works, your obligations as an employer and the benefits available to you and your employees.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
04.01
Why Thomond Asset Management’s Group Retirement Plan?
A Tax efficient, flexible way to plan for your employee’s retirement
Thomond Asset Management’s Group Retirement Plan is a company pension plan, which offers a tax efficient, flexible and accessible way to provide financial security for your employees in retirement.
We will guide you through the setting up process, help you decide the contribution level that best suits you, and assist you in selecting appropriate investment funds.
As Thomond Asset Management’s Group Retirement Plan is a defined contribution plan, it allows employers to take control of their pension costs by contributing a defined percentage of their employees’ salaries to their retirement fund. Usually the employee also makes a contribution to their retirement fund at the same time, facilitated by payroll deduction.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
05.01
Extensive benefits for both you and your employees
Benefits to the employer
Valuable Employee Attraction & Retention Tool Thomond Asset Management’s Group Retirement Plan is a tax efficient way of rewarding your employees for their service. Employers who make a contribution to their employees’ pension benefit from the valuable staff incentive, recruitment and retention advantages it provides.
Protection Options Thomond Asset Management’s Group Retirement Plan also allows you to avail of additional plan benefits such as Life Cover, and Disability Cover. (Subject to Terms & Conditions.)
Pension Scheme Online Thomond Asset Management’s Pension Online Tax Relief service is a password-protected website which You also benefit from tax relief on any contributions enables you to easily monitor your company’s that you make to your employees’ pension plan Group Retirement Plan and where you and your as these can normally be fully offset against employees can view up to date information on their Corporation Tax as a business expense. pensions, including contributions paid to date, individual fund values and choice of funds. Investment Options You have the option of choosing from a wide range of pension investment funds from over 14 fund managers both national and international. This Investment Solution offers your employees the opportunity to choose from a range of investment funds and strategies for their pension.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
05.02
Extensive benefits for both you and your employees (continued)
Benefits to employees
Security Your employees will have the security of a pension without having to arrange or administer the Plan themselves.
Retirement Options On retirement your employees can choose from two options in terms of how they wish to benefit from their retirement fund.
Tax Relief Employees can normally avail of generous tax relief on their contributions, tax-free growth on their investment, and a tax-free lump sum at retirement.
Pension Scheme Online Your employees can also avail of Thomond Asset Management’s Pension Online service, which will provide them with up to date information on their pension funds.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
06.01
Designing your Group Retirement Plan
Tailored to suit you and your employees’ needs
When you set up a Group Retirement Plan, you can design the Plan to suit your own needs and circumstances. The issues that you need to consider include the following: Contribution Options One of the most important aspects to consider is the level of contributions that you pay on behalf of your employees. Most company pension schemes operate on a full contributory basis where both the employer and employee contribute a fixed percentage of basic annual salary. A typical contribution level for employer and employee would be 5% each of basic annual salary. Normal Retirement Age Every Group Retirement Plan must set a Normal Retirement Age between the ages of 60 and 70. In Ireland, most company pension plans set this age at 65 years. This ties in with the state pension which starts at 66 presently. Eligibility Conditions As an employer you can decide the conditions that must be met before an employee joins the Plan. For example,employees could join the Plan once they are over a certain age and have one year’s service.
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Compulsory or Voluntary Membership You can decide to make membership of the Plan compulsory for new employees. This means all new employees must join and, if applicable, contribute to the Plan. Alternatively they may be given the option of whether they wish to join the plan. Any existing employees must be given a choice as to whether or not they join the Plan. Additional Voluntary Contributions (AVCs) Thomond Asset Management’s Group Retirement Plan provides the facility to enable members make extra contributions (AVCs) to provide themselves with additional retirement benefits. AVCs are subject to the same tax relief rules and Revenue limitations as normal employee contributions to the Plan. Employees can avail of new retirement options in respect of their AVCs. Trusteeship In order to qualify for the valuable tax benefits available, a defined contribution Group Retirement Plan must meet certain conditions and in particular the plan must be established under Trust. In establishing your Group Retirement Plan under Trust, it is necessary for Trustees to be appointed and there are a number of options available to you in this regard.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
06.02
Designing your Group Retirement Plan (continued)
Tailored to suit you and your employees’ needs
The options available to you are: 1. The employer can act as the Trustee of the Group Retirement Plan and this tends to be normal practice in small to medium size pension schemes. 2. Individual Trustees can be appointed and can include the senior management of the employer as well as an employee. 3. A Corporate Trustee may be appointed. 4. Where there are more than 50 members in a defined contribution Group Retirement Plan, the plan members are entitled to elect 50% of the Plan’s Trustees. Trustee Training It is important to note that recently introduced legislation requires Trustees to receive formal training in relation to their duties and obligations and this training will need to be carried out every two years.
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General Investment Trust Thomond Asset Management offers a Corporate Trusteeship facility. This service can reduce the potential risks facing company directors because the Trustee role is taken over by a professional trustee company. This means that directors of the company: • Do not require Trustee training. • Are not liable for potential Pensions Board Trustee fines. • Do not have any Trustee responsibilities under the Pensions Act. Ongoing Trustee support to employers is provided to enable them to understand and comply with all of their pension obligations.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
07.01
Tax benefits
Tax relief for you and your employees
Both you and your employees can enjoy considerable tax relief on contributions made to the Group Retirement Plan, subject to Revenue limitations. Employer tax advantages Your payments to the Plan can normally be fully offset against Corporation Tax as a business expense. The net cost of a company contribution of €1,000 is effectively €875.* This makes the Plan a tax efficient way of rewarding employees. *Note: Based on 12.5% Corporation Tax rate for
non-manufacturing companies.
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Employee tax advantages • Employer contributions to the Group Retirement Plan are not considered Benefit In Kind (BIK), and are not classified as part of an employee’s income. • Unlike other savings methods, your employees’ pension fund will grow free of Income Tax and Capital Gains Tax. • At retirement, part of your employee’s accumulated fund can be taken in the form of a tax-free lump sum. • If an employee makes a contribution to the Plan, he/she can benefit from Income Tax and PRSI relief (subject to Revenue maximum limits). In the case of regular contributions, deductions will be taken directly from the employee’s gross salary, thereby allowing tax and PRSI relief at source.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
08.01
Investment options
Tailor made investment options
Thomond Asset Management Investment Choice solution offers: 1. Trustee indemnity from fund selection responsibility provided certain conditions are met. 2. Choice – we offer a wide range of funds from which you can tailor an investment choice to offer to your employees. 3. Flexibility – members can pick from a suite of pre-selected pension investment funds. 1. Why investment choice is so important One of the most important factors that will affect the success of your employees’ pension is the investment return that is earned on the contributions. Contributions to the pension are invested in order to build up a fund that your employees can use to provide benefits when they retire including a pension and tax-free lump sum. The rate of return earned on both your contributions and your employees’ contributions directly affects the size of their fund when they retire – even an extra 1% p.a. investment growth can make a significant difference in the long-term.
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That’s why choosing the right fund in which to invest both you and your employee pension contributions, can make such a difference to the success of your employees’ pension. As a trustee you can decide where pension contributions are to be invested, or as is becoming the norm, you can offer employees a range of funds from which they can select. 2. Member Investment Choice Thomond Asset Management have designed a suite of funds which Trustees can offer to scheme members. These funds provide members with a wide range of investment managers and allow for different attitudes to risk. 3. Default Investment Strategy While it is important to offer a choice of funds, in some cases your employees may not wish to make an investment decision. To cater for this it is necessary for a company pension plan to have a default investment strategy. If your employees do not select an investment fund then their contributions will automatically be invested in the default investment strategy.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
09.01
Other Funds
Other funds? While the standard default strategy will meet the needs of most trustees and members, Thomond Asset Management also offers access to funds from 14 different investment managers for you to choose from. This extensive fund range caters for all investors preferences and attitudes to risk including regional equity, indexed funds and ethical funds.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
10.01
Retirement options
Employee retirement options
When your employees retire, they can use their retirement fund in either of two ways:
Taking Benefits • Your employees will usually retire at the Normal Retirement Age you have set for the Plan. • Employees, with your consent, can also retire early or late between the ages of 50 and 70.
Option 1 They can take a tax-free lump sum of up to a maximum of 1.5 times their final salary (depending on their service) and then use the balance of their fund to buy a Pension. Option 2 They can use their entire fund to buy a Pension (called an Annuity) which provides a regular secure income, paid for the rest of their lives. Employees who make Additional Voluntary Contributions (AVC’s) to their retirement fund or a 5% Proprietary Director will have additional options available to them at their retirement. Which option is best for my employees? Your employees don’t have to choose which option suits them best now. The important thing is that they have built up a sufficient fund to enable them to enjoy their retirement. We recommend that your employees speak to their Thomond Asset Management Adviser when thinking about retiring and he/she will advise them on the options available.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
11.01
Protection options
Additional Benefits for your employees
You can also decide to provide protection benefits for employees. This can include life cover, a spouse’s pension and disability cover. Life Cover A life assurance benefit is frequently included as part of a Group Retirement Plan. Depending on the age profile of your workforce, this can be a relatively inexpensive benefit to provide and will be highly valued by your employees. Most life cover policies will simply provide a lump sum payment on death. Under current Revenue guidelines it is possible to provide a lump sum of up to 4 times a person’s salary on death. It is also possible to provide additional pension benefits for an employee’s dependants. Disability Cover (Income Protection) The objective of disability cover is to provide an income, after an initial period, to an employee who 15
is totally unable to pursue their normal or a similar occupation as a result of long-term illness or injury, while not engaged in any other occupation. A typical disability benefit would be two-thirds of a person’s salary less the benefit they would receive from the State. Premium Protection Cover This benefit is designed to pay your employee’s pension contributions plus life cover premiums, if any, after an initial period, should they be unable to work due to illness or injury. Any AVC contributions your employee is making will not be covered under this benefit. Disability Cover and Premium Protection Cover are provided under a separate arrangement with the employer. If you would like more information on any of these Protection Benefits, please speak with your Thomond Asset Management Representative.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
12.01
Plan details and communications
Making it easy to track your fund
A pension is a long term investment and your employees will need to review their Plan regularly as to the retirement fund they will need. We recommend that your employees review their pensions at least once a year, especially if their circumstances change. Pensions Online Thomond Asset Management’s Pension Online is a password protected website, where you have instant access to your scheme’s information including membership details, payments history and members’ pension accounts.Because our Pension Online service is interactive, you can also use the website to update member’s salaries, or notify us when a member is leaving service. In addition, you can allow members of your Group Retirement Plan to view up to date information on their individual pension accounts.
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Employer Benefits • Immediate access to your scheme details online. • Enables you to view your employees up to date pension account details. • Ability to update your employees’ salary details in a more efficient manner. • Easily allows you to notify us when an employee leaves service. • You can view information on the payment history of the scheme. Employee Benefits • It provides your employees with up to date information on their pension accounts, such as contribution history, fund value and choice of funds. • It is easy to use.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
12.02
Plan details and communications (continued)
Plan communications
Annual Benefit Statements Thomond Asset Management will produce annual benefit statements for each member to allow them to monitor the progress of their retirement fund.
Annual Review An annual review date will be agreed for your Plan to ensure that all data in relation to membership is fully up to date.
The statements will show: • Contributions paid in respect of each member over the previous year. • Details of any life cover and disability benefit. • Current value of the employee’s plan. • A projection of the estimated benefits that the employee will receive at retirement.
Trustee Annual Report Thomond Asset Management will also produce a draft Trustee Annual Report to assist the trustees of the Plan comply with their obligations. This will show the total contributions paid during the previous year together with an investment report showing how the funds in which the Plan is invested have performed during the year.
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Thomond Asset Management
Employers Guide to a Group Retirement Plan
13.01
Frequently asked questions
Ensuring Peace of Mind
What happens if an employee leaves my employment? If an employee leaves your employment before Normal Retirement Age, there are a number of options available to them concerning their pension rights, as laid down under the Pensions Acts 1990 (as amended). The options available to an employee depend on the length of time they have been a member of the Group Retirement Plan. If they have been a member of the scheme for less than 2 years, then their only legal entitlement will relate to the value of their own contributions. Members of more than 2 years will be entitled to the value of both the employer contributions and their own contributions to the Plan.
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Will my employees be eligible for the State Pension if they contribute to a Group Retirement Plan? The State Contributory Pension will not affect benefits received from the Group Retirement Plan. All employees who have made the required number of Social Insurance contributions will qualify for the State Contributory Pension. What happens if an employee dies before they retire? The value of an employee’s pension fund becomes payable on death before retirement. This is in addition to any life cover benefit that may be payable under the Plan.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
14.01
Next steps
As you are already aware, you are now required by law to provide your employees with access to a suitable form of pension provision. With the introduction of the National Pensions Framework more people are becoming pension conscious, making the Group Retirement Plan an even more powerful aid to recruiting the high quality staff your business needs. It gives your employees one less thing to worry about, and one more reason to join or remain with your company.
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We recommend you speak with your Thomond Asset Management Representative, who will ensure that you have all the relevant information to make a considered and educated decision that best meets your needs and the needs of your employees.
Thomond Asset Management
Employers Guide to a Group Retirement Plan
15.01
About Us Thomond Asset Management 82 O’Connell Street Limerick Tel: 061 462024 Fax: 061 312033 Email: info@thomondam.com www.thomondam.com
Regulatory Status with the Central Bank of Ireland FOLK Asset Management Ltd. t/a Thomond Asset Management (“the Firm”) is regulated by the Central Bank of Ireland as an Authorised Advisor under Section 10 of the Investment Intermediaries Act, 1995 and as an insurance intermediary registered under the European Communities (Insurance Mediation) Regulations, 2005. The Central Bank holds registers of regulated firms. You may contact the Central Bank on (01) 224 4000 or alternatively visit their website on www.financialregulator.ie to verify our credentials. Our Investment Firm Intermediary Number is C52926. Disclaimer This document does not constitute an offer and should not be taken as a recommendation from Thomond Asset Management. Advice should always be sought from an appropriately qualified professional. The case studies are not real people and are for illustration purposes only. Whilst great care has been taken in its preparation, this newsletter is of a general nature and should not be relied on in relation to specific issue without taking appropriate financial, insurance or other professional advice. The information contained in this newsletter is based on our understanding of current and intended legislation and Revenue practice as at September 2011.
Warning: -
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T he income you get from an investment may go down as well as up. T he value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates. P ast performance is not a reliable guide to future performance
Thomond Asset Management