Apart from the volatility in investment markets and everything else going on in the economy and the world in general, 2022 was also a tumultuous year in the world of pensions for business owners.

This is where it gets a little technical, but if you are a business owner of a profitable business, it is well worth sticking with us here as there is an opportunity you need to be aware of. Otherwise, give us a call and we will discuss it further with you.

In July 2022 there was a major upheaval in the pensions world, when due to regulatory developments, all the main providers ceased to offer one-man schemes, commonly known as Executive Pension Plans. While schemes set up prior to April 2021 were unaffected, any schemes set up since then or in the future would have to comply with significant new regulatory requirements that were introduced under an EU Directive known as IORP II. It was simply not viable for providers to offer a product to meet these new requirements.

The market was thrown into a state of flux, with business owners wishing to establish new pension schemes being unable to make tax-efficient large company contributions.

However the Finance Act 2022 came into law at the end of last year, which opened up a significant and very attractive opportunity for business owners, particularly of profitable businesses. The change relates to Personal Retirement Savings Accounts (PRSAs), which up until the beginning of 2023 treated employer contributions as a Benefit-in-Kind for an employee from an income tax perspective. This is now no longer the case, with employer contributions to a PRSA not treated as a Benefit-in-Kind in the hands of the employee. This gives the employee full personal benefit of their tax relief limits, without having to allow for any employer contributions made.

But furthermore, and unlike company pension plans, the big opportunity in the new regulations is they do not define the level of employer contribution allowable with reference to age, service, salary or other pension benefits. The only factor that limits employer contributions to a PRSA is the lifetime Standard Fund Threshold (SFT) of €2million. This makes PRSAs extremely attractive now for business owners when compared to occupational pension schemes or master trusts, where employer contributions continue to be limited by salary, service and age factors.

Also, tax relief on all employer PRSA contributions can be claimed in the accounting period in which they are paid. This is unlike a special contribution to an occupational pension, where the tax relief must be spread forward over 5 years.

The Opportunity

The new opportunity is for owners of profitable businesses, who can now extract large sums of money from their business by making large-scale contributions to a PRSA, with the only restriction being to avoid funding past the SFT.  Also, if your spouse and/or your children are working in the business, the company can also fund pensions for them up to the SFT. That is a significant wealth extraction opportunity.

In addition, it’s worth noting that PRSAs differ to company pension plans when taking your benefits. First of all, you can get access to your benefits from age 50. Also with a PRSA, you can phase in your retirement by dividing your pension funds across multiple PRSAs. This option is unavailable when retiring from an occupational pension scheme.

So the previously unattractive PRSA has now become a fantastic wealth extraction vehicle for business owners of profitable companies. However as with all matters pension related, specialist advice and careful planning are needed. We would be delighted to help you.

The cost-of-living crisis is starting to bite for lots of people. In the UK we’re seeing widespread strikes, and while thankfully this hasn’t been the case in Ireland, the current high inflation rate is starting to hit people hard in their wallets. Almost 80% of the population are worried about their finances due to the ongoing cost-of-living crisis, a recent survey commissioned by Aldi has shown. Essentials like food, electricity, gas and oil all saw prices skyrocket in 2022, leaving many Irish families struggling to cope with the hikes.

So saving money will be an important element of financial planning for many families over the next year or two. Here are a couple of areas to consider if you’re looking to tighten the belt a little.

Control your energy costs

Wholesale gas prices have fallen sharply over recent months, but unfortunately this won’t translate into lower household bills for some time yet. So the battle to reduce energy consumption at home should continue.

First of all, you should look to minimise your wasted energy – don’t heat the house when there’s no-one home, turn off lights and use night saver rates. Small actions make a difference, so don’t boil a full kettle for a single cup of tea. There are countless actions like these that will make a difference.

Secondly shop around for the best energy rates. Either contact the various suppliers to see what they have to offer or use a comparison site to compare the various plans. Staying loyal to one supplier is often NOT rewarded, with new customers getting better deals.

Finally, there are more energy saving tips available at https://www.seai.ie/home-energy/energy-saving-tips/

Can you use Renewable Energy sources?

For some people it still sounds a bit far-fetched, but installing the likes of solar panels is now much more mainstream. While there are short-term purchase and installation costs involved, renewable energy sources offer the potential for long-term savings. There are also potentially grants available, so familiarise yourself with the SEAI’s Communities Energy Grant (CEG) scheme, which supports energy efficiency community projects through capital funding and partnerships.

There is currently a network of approx. 30 companies across Ireland that will work with you to ensure that your property can reach its maximum energy-saving potential. As technology continues to advance, so too will your energy-saving options. There are many ways to increase the self-sustainability of your home, while also having a positive impact on the environment.

Mortgage costs continue to rise

Rising interest rates have become the hottest of economic topics in recent months and there is currently no sign of rates levelling off any time soon. All of those tracker mortgages that were so attractive when rates were low have definitely lost their sheen now.

Particularly if your outstanding mortgage is high or the repayment term is more than a couple of years, it certainly makes sense to have a look to see if there are opportunities to save.

Consider your travel costs

The price of petrol and diesel has jumped hugely over the last year. If you are planning on changing your car soon, an Electric Vehicle certainly should be considered.  While the price of public charging has increased in line with energy price inflation, there are still some grants available for the installation of home chargers, which can be used in conjunction with lower night-time electricity tariffs.

It's also worth taking note of the greatly improved infrastructure for cycling. And with summer on the horizon, is it time to avail of the Bike to Work scheme and start getting fitter during your daily commute, while also saving money? If you don’t feel quite so athletic, the Bike to Work scheme also applies to an electric bike - this might be a better alternative than jumping in the car.

Review all regular bills

Start with reviewing the services that you’re paying for each month and check are you actually using them. Then consider if you are getting the best rates as your loyalty is often not rewarded by suppliers. So spend a bit of time going through your phone contracts, your car & house insurance, the streaming services you’re paying for (Netflix / Apple TV / Amazon Prime / Spotify etc.) and your broadband contract. Are there savings here?

We’re living again in inflationary times. Without a matching income increase, you run the risk of slowly becoming poorer in real terms. Now is the time to take actions and stop that decline.