General information related to pension for older person

Donald Trump

Hi,


I have a relative in their early 60's who has a "9-5" job and also has some other income as a sole trader


They have to pay top rate of tax on all their sideline income.


Their pension for the 9-5 is not great. Only about 15 years or something paid in. So they won't have a great pension from that when they retire.



I had suggested to them to see about investing in a personal pension rather than paying the tax on the sideline income.


The issue is that I have no idea where to start to advise them. It looks like it won't be possible to get something set up now to backdate for last year. you see, they went to see someone years ago and whatever product that person was selling them, it didn't seem great and also died with them in the sense that the pension owner passed away, then there was nothing left for the spouse. So my relative didn't like that and seems to think that that is the case for all pension products.



My understanding is that there are different types of pensions and restrictions on drawing out of them.



What I would envision for them is some kind of simple savings account. Bung the 40% in there now, save the tax on that and draw it out in a few years after retirement. Where would I start looking for such a thing? How long do they take to set up? Would things need to be coordinated with the existing work pension or can it be set up separately?


I am not going to act on specific comments. I just want to get an idea as I have no idea where to start looking. I don't want to direct them to ring some random broker in case that broker is a cowboy.

Geuze

If a worker is already in an occupational pension, then the extra pension they can do is known as an AVC.

So in this case, you want a PRSA-AVC.

Donald Trump

Geuze wrote: »

If a worker is already in an occupational pension, then the extra pension they can do is known as an AVC.

So in this case, you want a PRSA-AVC.

They asked in work years ago but the person they asked didn't really know....kinda just said "no there's nothing" and they never followed up.


Is it something that you set up separately, or something that you set up yourself but has to be somehow linked to the occupational pension or something that the workplace has to add-on for you i.e. you can't just set up your own?


If it's the latter, and they go and get fobbed off, then at least I'll be able to tell them that that isn't correct and they need to push them about it!


Would there be complications due to the non-9-5 income? Say if they earn 50k in the job and 20k on the sideline and they want to max out the contributions at 40%, would the work one let them put in 28k rather than the 20k?


I just think it's an awful waste to be paying top rate of tax on the extra bit when they will retire in a few years with not much of a pension.

The J Stands for Jay

Geuze wrote: »

If a worker is already in an occupational pension, then the extra pension they can do is known as an AVC.

So in this case, you want a PRSA-AVC.

They can have a personal pension in respect of the sideline income

Donald Trump

McGaggs wrote: »

They can have a personal pension in respect of the sideline income

Where do you start though to get that up and running. Does it have to be through the 9-5 employer or even linked to the occupational one somehow?


It's not that it's a secret or they don't want to tell the employer. It just seems that whatever rep is there or whoever is supposed to know these things - actually seems to know nothing.



Can you buy an off-the-shelf product from a Bank? A broker? Just set up your own investment thing somehow?

The J Stands for Jay

Donald Trump wrote: »

Where do you start though to get that up and running. Does it have to be through the 9-5 employer or even linked to the occupational one somehow?


It's not that it's a secret or they don't want to tell the employer. It just seems that whatever rep is there or whoever is supposed to know these things - actually seems to know nothing.



Can you buy an off-the-shelf product from a Bank? A broker? Just set up your own investment thing somehow?

It has nothing to do with the employer and can't be set up with them. Broker would be the best way to go. Banks will just sell you whichever pension they have a contract for, usually only Irish life.

Donald Trump

McGaggs wrote: »

It has nothing to do with the employer and can't be set up with them. Broker would be the best way to go. Banks will just sell you whichever pension they have a contract for, usually only Irish life.

ok. Useful info. Thanks


If you have two separate ones - occupational and personal one, is your income ringfenced between the two?


So, suppose you want to bung in the max allowed 40%, can you put that into whatever you like or would you be restricted from putting additional money from occupation into occupational pension.

The J Stands for Jay

Donald Trump wrote: »

ok. Useful info. Thanks


If you have two separate ones - occupational and personal one, is your income ringfenced between the two?


So, suppose you want to bung in the max allowed 40%, can you put that into whatever you like or would you be restricted from putting additional money from occupation into occupational pension.

You can only put 40% (or the appropriate limit for your age) of the relevant income into the pension relating to that income. There's no mixing and matching. If you're earning 20k from the side income, you can only put 8k into the personal pension. The pension relating to the job would only be allowed 40% of the income from that job.

silent_spark

McGaggs wrote: »

You can only put 40% (or the appropriate limit for your age) of the relevant income into the pension relating to that income. There's no mixing and matching. If you're earning 20k from the side income, you can only put 8k into the personal pension. The pension relating to the job would only be allowed 40% of the income from that job.

Really? A few year’s ago I had three to four PAYE jobs and I paid the maximum percentage for my total income into a PRSA linked to one of them. Is this a difference between PRSAs and occupational pensions?

The J Stands for Jay

silent_spark wrote: »

Really? A few year’s ago I had three to four PAYE jobs and I paid the maximum percentage for my total income into a PRSA linked to one of them. Is this a difference between PRSAs and occupational pensions?

Occupational pensions are set up to only accept contributions from that one employment. PRSAs can have contributions in respect of different employments/incomes.

colm_c

Another option to consider is along the lines of an executive personal pension.

It's effectively an occupational pension, but setup for a single person rather than a company.

These have no limits for contributions if they come from the employer.

These are usually only available for directors/owners of small companies.

So they could put 100% of their sideline income into it.

They really need to do some research, talk to a good independent pensions advisor, do some financial planning and see what options are available.

Most likely will be a combination of pension products.