Redundancy in Ireland: Implications and Entitlement

To be made redundant is a difficult and often stressful experience. If you you find yourself facing redundancy in Ireland, it is important that you know your rights and the financial implications involved such as how redundancy payments interact with your pension benefits. At Fairstone, we aim to give you clear guidance and useful advice in order to assist you through this challenging period with confidence and security. 

How does redundancy work in Ireland? 

You may receive different types of payments when you are made redundant, which are as follows: 

  • Statutory Redundancy Payments: 

    You are entitled to redundancy payment if you have been employed for more than two years. It is calculated at two weeks’ pay per year of service plus an additional week’s pay up to a maximum of €600 per week. 

  • Ex Gratia Payments:

    These are discretionary extra sums paid by employers, commonly found in voluntary redundancy packages; they can be substantial and occasionally have tax advantages. 

  • Pension Lump Sums:

    Should you be on the verge of retiring, your employer’s pension scheme could provide a lump sum, perhaps tax-free up to a certain level.

 

Redundancy in Ireland: Key Considerations 

When presented with redundancy options, it’s crucial not to make a rushed decision. Take the time to carefully evaluate your choices. Consulting with a financial advisor can provide valuable insights to help you understand which option suits you best.  

Consider these factors when deciding how you would receive your redundancy payment and pension: 

  • Immediate Vs Deferred Pension: 

    You may have to choose between getting a bigger redundancy payment now or retaining a sum of money upon retiring in the future. 

  • Lifetime Limits:

    There exists an amount of tax-free money that has limits over your lifetime which could influence your decision. 

  • Obtaining professional advice: 

    Discussing with a financial advisor will assist in exploring various options and deciding on what works best for you considering where you are today. 

Practical Steps at and After Redundancy 

  1. Analyse Your Financial Situation:

    This involves identifying your current expenditures and future financial goals in order to determine whether you will save your money, invest it, or use it for day-to-day expenses.

  2. Review Your Benefits:

    Ensure that you replace any lost benefits, such as health insurance, income protection, death and ife service (life insurance) or pension contributions. When you move from one job to another, ensure that the benefits offered by your new employer are the same as or better than those of your previous employer. 

  3. Review your Pension Leaving Service Options:

    Upon leaving your role, normally 4 to 5 weeks after you will receive a leaving service options letter (goodbye letter) from your pension provider. It’s critical to seek advice on your options as not making a decision could impact your future financial goals and objectives.  

  4. Plan for the Future:

    Use this opportunity to reassess your career and financial plans. Consider whether you can take time off, or if you need to find a new job immediately. 

 

How Fairstone’s Experts Can Help You 

At Fairstone, our expert advisors are here to help you understand the complexities of redundancy regarding pension schemes. 

Here are several ways we can support you in your financial journey: 

  • Understanding tax implications: we will explain how different payments are taxed and what measures you can take to reduce your tax liability. 
  • Evaluating your alternatives: we will assist you in evaluating whether or not it is in your best interests to keep or waive any rights to a lump sum payment from your pension. 
  • Preparing for tomorrow: we will help align your redundancy and pension options with your long-run financial goals. 

 

By following these steps, managing  your financial situation and making informed decisions during redundancy will help you to keep things on track and get back on your feet as quickly as possible.

At Fairstone, our financial services are specifically tailored to address the unique needs and concerns of individuals facing redundancy in Ireland. Whether you’re seeking assistance with investments or managing your pensions, we’re here to help. 

Book today your no obligation redundancy consultation.

Let’s Talk

Source: Gov.ie

  

Related articles: 

Personal retirement bond in Ireland

The implications of auto-enrolment for business owners

 

 

Personal Retirement Bond in Ireland

A Personal Retirement Bond (PRB), also known as a Buy-Out Bond, is a pension plan managed by a company’s trustees for employees leaving the company. It lets individuals keep control of their pension savings when changing jobs or exiting a pension scheme.

 

Firstly, with people living longer, building a substantial pension fund is crucial to avoid financial insecurity in later years. Retirement Bonds offer individuals control over their pension pot, eliminating the need for consultation with pension trustees. Additionally, the flexibility of investment choice ensures alignment with individual risk tolerance and objectives.

Moreover, Retirement Bonds provide tax benefits, with funds growing tax-free and the option to draw a tax-free lump sum upon retirement. This financial tool empowers retirees to fulfill aspirations and enjoy a comfortable retirement. In summary, starting a Retirement Bond is a proactive step towards securing financial stability and peace of mind during retirement.

 

Benefits of a Personal Retirement Bond (PRB)

  1. Flexibility: PRBs allow individuals to customise their retirement savings plan according to their needs by offering flexibility where you can access these funds from age 50 without needing to drawdown any other pension pots you may have. A PRB will also allow the flexibility to choose from a wider range of funds that you may not have in an occupational pension scheme.
  2. Professional Management: PRBs are managed by investment professionals, ensuring optimal returns while minimising risk.
  3. Portability: PRBs are portable, enabling individuals to change provider if needed unlike with an occupational pension arrangement
  4. Control: PRBs provide individuals with control over their retirement savings, allowing them to choose investment strategies and monitor fund performance.

 

Comparison with other retirement savings vehicles

Each scheme caters to different needs and preferences, offering varying levels of flexibility, control, and tax efficiency.

Personal Pensions
  • Suitable for the self-employed or those without employer-provided pensions.
  •  Offers flexibility tailored to individual lifestyles.
PRSA Pension
  • A flexible and portable pension regardless of employment status.
  • Contributions can be made at any time, and the plan can be taken from one job to another.
Retirement Bond (PRB)
  • Enables the transfer of pension benefits when leaving a pension scheme.
  •  Offers flexibility and tax efficiency, allowing control over investments.
Executive Pension
  • Geared towards company directors and owners.
  •  May include Additional Voluntary Contributions (AVCs) for building additional retirement funds.
Self-Directed Pension
  • Suitable for experienced investors wanting to manage their pension fund investments themselves.
AVCs (Additional Voluntary Contributions)
  • Extra contributions made alongside existing company pensions.
  •  Provides an opportunity to boost pension funds before retirement and offers tax efficiency.

 

Tax advantages and implications for PRB

Upon retirement, you have the option to receive a tax-free lump sum from your PRB. This lump sum can either be 25% of your fund or, based on your salary and service, up to a maximum of 150% of your salary. The maximum tax-free lump sum allowable is €200,000. The remaining balance of your fund can then be invested in an Annuity or an Approved Retirement Fund (ARF).

 

Potential pitfalls and risks associated with PRBs

A Personal Retirement Bond operates similarly to other investment vehicles, with its value subject to market fluctuations. When establishing your PRB, you have the flexibility to select a risk level aligned with your risk tolerance and investment objectives. Higher risk levels offer greater profit potential but also entail a heightened risk of loss.

 

The regulation of risk levels and their availability to customers is rigorously overseen at the EU level, with oversight from the Irish central bank. The European Risk Rating provides a comprehensive depiction of risk on a sliding scale, enabling investors to grasp both the potential rewards and pitfalls associated with higher risk. By leveraging this rating, potential investors can make well-informed decisions regarding the level of risk they are comfortable assuming with their personal retirement bonds.

 

Planning for your retirement is crucial to sustain the lifestyle you envision for your post-career years. Starting the planning process early offers numerous benefits, but regardless of your career stage, seeking guidance from an independent pension advisor can significantly enhance the value of your retirement and ensure stability.

Fairstone’s pension advisors possess extensive expertise to help you make informed decisions and identify opportunities within the pensions market tailored to your unique circumstances. They will take the time to understand your financial needs, risk tolerance, and ultimate goals, guiding you through the fundamental elements of investing and ensuring you comprehend the implications involved. With their assistance, you can create a diversified range of investments within your Buy-Out Bond, spreading your funds in a manner that aligns with your needs and expectations for risk and return. Your Fairstone pension advisor will provide personalised guidance at every step of the process, empowering you to optimise your retirement planning journey.

 

Let’s Talk

 

Source – Zurich.ie

 

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The Implications of Auto-Enrolment for Business Owners

As business owners, it is crucial to understand the upcoming implementation of auto-enrolment and its potential implications. This article aims to shed light on the upcoming pension scheme proposal, which seeks to encourage greater private sector pension contributions. With only about 35% of private sector employees currently saving for retirement, the government aims to raise this number to 70% and beyond.

Understanding the significance of adequate retirement savings is of utmost importance.

 

Auto-Enrolment Explained:

Auto-enrolment is a plan set to be rolled out by the end of 2024, targeting employees aged between 23 and 60 who earn €20,000 or more across all employments and are not currently contributing to an existing employer pension scheme. Under this scheme, eligible employees will be automatically enrolled, simplifying the process of saving for retirement.

 

Proposed Contribution Structure:

According to the proposed scheme, which is subject to specific draft legislation, both employers and employees will contribute matching amounts. In the first year, the suggested contribution rate is 3.5% of the employee’s salary. This means the employer and employee each contribute 1.5%, while the state adds an additional 0.5%.

 

Implications for Higher Tax Rate Earners:

One significant aspect of the auto-enrolment scheme is that the state contribution serves as a 33% boost to the employee’s contribution, rather than the traditional income tax relief. This change can have notable implications for higher tax rate earners, potentially resulting in a loss of tax relief compared to an occupational pension scheme.

 

Projected Contribution Increase:

The contribution requirements under the auto-enrolment scheme are expected to increase every three years over a phased-in period. Within ten years, the total contribution is projected to reach 14%, with employers and employees contributing 6% each, along with an additional 2% from the state. Importantly, these contributions will only apply to earnings up to €80,000. Earners in the higher tax rate bracket may experience a significant loss of tax relief under auto-enrolment compared to an occupational pension scheme.

 

Expert Opinions and Suggestions:

  • Limited Investment Funds and Lack of Advice: One drawback of the proposed auto-enrolment scheme is the restricted selection of investment funds and the absence of advisory services for employees. Having options and guidance for investing in the future is essential. Thus, setting up your own pension scheme grants the freedom to choose the investment provider and advising brokerage. It allows flexibility in changing providers when necessary, fostering healthy competition and better outcomes for both employers and employees.

 

  • Restricted Early Access: Unlike an occupational pension scheme that allows early access upon leaving service, auto-enrolment restricts early access to pensions until normal retirement age. Flexibility is key, and the ability to access pension funds earlier can be vital for some individuals.

 

  • Seek Guidance and Establish an Occupational Pension Scheme: Our recommendation is to seek guidance on establishing your own occupational pension scheme before auto-enrolment becomes mandatory. By doing so, you can avoid the need to invest in a mandated arrangement. Personalising your pension offering enhances employee engagement, demonstrates commitment to their well-being, and provides strategic advantages in administration, investment choice, cost management, compliance, and attracting and retaining top-notch talent.

 

While we appreciate the government’s efforts to increase pension funding through auto-enrolment, it is important to recognise that it may not be a perfect solution. Taking proactive steps to establish your own pension scheme offers benefits such as administration control, investment choice, cost management, compliance, and attracting and retaining talented individuals. We understand that auto-enrolment can be overwhelming, and our team of expert pension advisors is here to help you navigate this change and understand its impact on your business.

Don’t hesitate to reach out to us for more information.

Let’s Talk

 

Source – Gov.ie & Zurich.ie

Fairstone Revolutionises the Irish Financial Landscape with Groundbreaking Downstream Buy Out (DBO) Acquisition Model Launch

In a strategic move set to reshape the financial landscape in Ireland, Fairstone has unveiled its revolutionary Irish buyout model, just one year after making waves with the acquisition of Dublin-based Pax Financial. Following a number of senior appointments, including Financial Planning Director Derek Delaney, Head of M&A, Anthony O’Driscoll, and Marketing Director Fergal Lynch, Fairstone is now poised to introduce its premium Downstream Buy Out (DBO) model to the Irish market.

 

At the core of Fairstone’s ambitious growth strategy, the Downstream Buy Out model seamlessly integrates culturally aligned firms before a complete acquisition, with the primary goal of maximising capital value. Throughout the integration phase, partnering firms gain access to Fairstone’s investment, cutting-edge technology, abundant resources, empowering them to realise their growth aspirations.

 

Fairstone Ireland CEO Paul Merriman commented, “The DBO is a market leader in the UK, and I am thrilled to extend this proposition to forward-thinking financial planning firms in Ireland. We are actively seeking partnerships with firms uninterested in an outright sale today; our focus is on investing in growth and supporting business owners dedicated to optimising their business value through a long-term partnership with Fairstone.”

 

Merriman emphasised the DBO’s distinctive nature, stating, “This is not your typical M&A transaction; it is crafted for visionary business leaders committed to their enterprises, eager to capitalise on future growth.”

 

Fairstone’s success in the UK is evident, boasting its best-ever dealmaking year, in 2023, with twelve firms embracing the DBO model. Fairstone Group, CEO Lee Hartley celebrated the Irish launch, saying, “Over the last 15 years, we’ve demonstrated the effectiveness of the model. Our unconventional approach to dealmaking consistently yields year-on-year outperformance, with the latest figures revealing fully acquired firms surpassing their target sale values by an average of 113%.”