With the upturn in the economy, its good to see businesses turning profits which gives sole traders and business owners the confidence to start looking at “Pension Planning” again.
**October 31st is the deadline for sole traders to write off tax by using a pension vehicle!!**
What is a pension?
In lay man’s terms, its merely a savings plan with tax relief.
How does tax relief work for a sole trader?
In a nutshell, a sole trader on the higher tax rate puts €10,000 of his income which was going to be taxed at 40% into a pension. Rather than pay €4,000 (40% of €10,000) to the taxman, this €4,000 goes into the sole traders pension (ie savings plan + tax relief).
Sounds good, anything else?
Yes, your pension investment grows tax free too, you can drawdown a tax free lump sum at your chosen retirement age, you choose the level of risk of your investment, a meeting with a good financial advisor can tailor a pension plan that you will both understand very clearly and feel very comfortable with .
Sounds too good to be true, why isn’t everyone doing it?
I hear a myriad of reasons why people don’t use pension vehicles but most people either don’t understand the concept properly or simply cannot afford to do it right now.
Plus… you will not have access until at least age 60 in most cases (50 in some cases) . Remember, its about saving for the long term, ie.. if you retire tomorrow at age 66, you are given a maximum state pension of €233.30 per week, which is nearly a 50% drop in income for a minimum wage worker. Is that enough for you??
To discuss “pension planning” speak to your trusted Financial Broker today!!
By Mark Cahill BA,QFA,RPA
(Contact [email protected] or Office Landline 01-4411748)