30


East Cork


by GERARD O’BRIEN The pensions industry is


very fond of abbreviations and anacronyms, from PR- SA’s to PRB’s and AVC’s to ETV’s, it’s no wonder most people would rather bury their head in the sand than discuss their retirement planning. Pensions are quite a sim-


ple concept to understand. Familiarizing yourself with some of the most common key terms should make it that


Business Our Simple Guide To Pensions In Ireland little bit easier when


it comes to understanding your pension entitlements and retirement planning in general. With that in mind, below I have compiled a list of the most commonly used


acronyms. Personal retirement sav- ings account (PRSA): This is a long-term personal retire- ment account introduced by the Pensions Act 2002. It is designed to enable people, especially those with no pen- sion provision, to save for retirement in a flexible man- ner. A PRSA is a contract between an individual and a PRSA provider in the form of an investment account. Subject to age, employment status and income-based limits, tax relief will be given for contributions to a PRSA. DC Pension (Defined contribution pension plan): With a defined contribution pension plan, the pension income payable on retire- ment depends on the value of the pension fund at that time. The value of this type of pension will fluctuate with movements in Finan- cial Markets.


DB Pension (Defined ben-


efit pension plan): This is a type of pension plan where- by the pension income paid at retirement is guaranteed by your employer, your pen- sion Income is generally related to your final salary and your number of years of service spent


with the


employer. This type of Pen- sion is very expensive for an employer to maintain, most private sector DB schemes have closed in recent years, it’s now only found in the Public Sector. PRB (Personal Retire-


ment Bond, also known as a Buy-out bond): If you leave or move employment, you can transfer the value


of


your old employer pension to an individual fund in your own name‚ where your money continues grows tax free‚ until retirement. This fund can usually invest in a mix of assets. It may also


Dear Karen by KAREN WALSH


Dear Karen, A younger woman has


moved in with my father and I’m worried. My father is in his late six-


ties and he has 70 acres and the farmhouse. It’s not great land and it has been rented on a lease to a neighbour for the past 5 years. My mother died a few


years ago and myself and my siblings, four of us in total, have all moved out of the family home over the years. About two years ago my father started going to social dances in a local town with a friend of his and he met a woman at one of these dances. Over the past 12 months


she has become more and more a feature of my father’s life and I discovered the last time I visited him that she has moved in with him and is living in the house for the


will that


past six months. I haven’t had a chance to talk to my father about this situation as she was there, but I am wor- ried about it. I know my father has a leaves the farm


and house to myself and my three


siblings equally, but


could this woman lay claim to part of it, if my father passed away?


Dear Mary, This


scenario raises a


number of issues. (1) What rights does this


lady gain from co-habiting with a man to whom she is not married? Under the Civil Partner- ship and Certain Rights and Obligations of Cohabitants Act 2010 this lady currently doesn’t appear to have rights to your father’s property. However, if


interest. Couples may effectively


contract out of the terms of the 2010 Act. Agreements on financial matters be- tween cohabitant partners may be regarded as valid, only if each party receives independent


legal advice


or waives the right to inde- pendent legal advice. Such an agreement con-


stitutes a contract and must be signed by each party.


It


may also include a provi- sion that the redress scheme does not apply to them. A court may set aside or vary a cohabitants’ agreement in exceptional circumstances if its enforcement would cause serious injustice. (2) The Will It


seems likely that they live to-


gether for 5 years or more, she may acquire rights to his property. At the end of the relationship, she would have to apply for a proper- ty adjustment order or for redress. A court would de- termine, based on a number of


factors, the size of her the


Will your father executed (of which you are aware), is likely valid. However, if your father was to remarry, any earlier wills would be invalid under the Succession Act, 1965. When a parent dies leaving a valid Will, their legal spouse is gener- ally entitled to 1/3 of


be possible to transfer this benefit into another pension structure. AVC (Additional Volun-


tary Contribution): An indi- vidual who is a member of a company pension scheme can also make personal contributions to a separate pension plan called an AVC plan. AVCs can help to in- crease the value of a pen- sion fund or can be used to contribute to a tax-free lump sum at retirement. If you are earning an income, you can claim tax relief on AVC’s up to certain limits. ARF (Approved Re-


tirement Fund): This is a post-retirement investment fund. It is an alternative to buying an annuity. It is a personal tax-free retirement fund in which the holder can keep their pension in- vested as a lump sum after retirement. The holder can withdraw income (which is


spouse is generally entitled to 2/3 of the estate. It is wise for people who


are older, to consult their physician before executing a new Will or any impor- tant legal document. Such a medical report would allay concerns that the he or she didn’t have the mental ca- pacity to make decisions. (3) What


steps a family


can take to protect elderly relatives? An Enduring Power


of


Attorney is a document executed by a person (the donor) who is mentally ca- pable and which is only in- tended to be brought into force if the donor becomes or is becoming mentally incapable. In this event the attorney(s) appointed by the donor can apply for the registration of the enduring power of attorney so that they may act on behalf of the donor. This allows peo- ple (often relatives)


they the


estate. When a parent dies without a Will, their legal


trust to manage their assets when they can no longer do so. At the start of the pro- cess, a physician must report that the person is mentally sound. Other people are ‘Notice Parties’ and are no- tified of the creation of such a document as a protection. If the Donor is married,


Tel: 021 463 8000 • Email: info@eastcorkjournal.ie • Web: www.eastcorkjournal.ie


subject to income tax) from this as and when they wish. A minimum of 4% of the value of the ARF has to be drawn down every year by the holder, this is known as a deemed distribution. AMRF (Approved Min-


imum Retirement Fund): This is similar in nature to an ARF (above), a sum of €63,500 must be set aside and invested in AMRF if you do not have a regular Pension Income from any source of at


least €12,700


pa, the AMRF cannot be accessed until age 75 (it can be accessed/party ac- cessed prior to age 75 in certain circumstances) at which point the AMRF be- comes an ARF. Until then, the holder can only access the growth in the value of the fund over this €63,500 figure Annuity: An annuity is


a contract with a life as- surance company through which the life


company


will pay the holder a guar- anteed, regular income (a


their spouse must be a no- tice party. Often years can elapse


between the creation of the document and its registra- tion with the High Court. In the intervening period it is usually kept safe by the Solicitor.


pension in most cases) for the rest of their life in return for the holder paying them a lump sum at the outset. The amount of pension income or annuity that


the holder


receives will depend on the size of the lump sum, the annuity rates available at the time, age, gender and the state of health of the in- dividual at the time of pur- chasing the annuity. With interest


rates currently at


their lowest levels in decades this makes Annuities a very unattractive option at


the


moment. Enhanced Annuity:


These are relatively new to the Irish Market. An en- hanced annuity is similar to a standard annuity, except that


it takes into account


your health status and life- style health risks (e.g. smok- ing) in determining the level of regular income payable to you. With an enhanced annuity you may be entitled to a higher regular income than you would under a standard annuity.


port Scheme Act 2009 (also known as ‘Fair Deal’) is managed by the HSE. The statute outlines a claim the state may have to estates when people move to long term care. The application process


When the doc-


ument is registered by the Attorneys, it is sent, with proofs, to the Wards of Courts Office in Dublin. Taking control of some-


body’s assets and health re- lated decisions is a serious step and so requires care to prevent over reach. It is not an easy process and can take several months to complete. If family members believe their relative is no longer mentally capable, it is likely too late to put an Enduring Power of Attorney in place. All of this advice is given without knowing


the cir-


cumstances of your father’s partner.


Obviously, your


father would gain simi- lar rights to any estate she might have. It could well be argued this lady provides a


that


benefit to your family and should be welcomed. Her participation in his life may contributing to his good liv- ing condition. (4) Nursing Home Sup-


involves full financial disclo- sure and assessment. Having looked at income and assets, the Financial As- sessment will work out the contribution to care. The person will contribute: • 80% of net income and • 7.5% of the value of any


assets per annum. However, the first €36,000 of assets, or €72,000 for a couple, will not be counted at all in the Financial Assessment. Where


assets include


land and property, the 7.5% contribution based on such assets may be deferred and paid to Revenue after death. This is known as the Nurs- ing Home Loan. A principal


residence


will only be included in the financial assessment for the first 3 years of a person’s time in care. This is known as the 22.5% or ‘three-year cap’ (the cap is 15% for ap- plications made before 25 July 2013). It means that they will pay a 7.5% con- tribution based on the prin-


eastcorkjournal Hopefully this article will


help you understand your next pension statement when it arrives in the post. If you need further clarifica- tion on any of these defini- tions, please don’t hesitate to contact us. Gerard O’Brien LL.B LL.M CFP® QFA is a Certified Financial Planner and the Owner of Herit- age Wealth Management, a Financial Planning practice based at 27 Cook Street, Cork. For more tion, contact


informa- Gerard at


gerard@heritagewealth. ie www.heritagewealth.ie Disclaimer: All data


and information provided within this article is for in- formational purposes only. Heritage Wealth Manage- ment Limited makes no rep- resentations as to accuracy, completeness, suitability, or validity of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries, or damages arising from its use.


cipal residence for a maxi- mum of 3 years regardless of the length of time spent in nursing home care.


If


the elderly person chooses a private nursing facility, it is likely that their estate will owe the State a larger sum. Karen Walsh, of Walsh &


Partners, Solicitors, comes from a farming background and is a solicitor specialising in agricultural law, land law and renewable energy and is author of ‘Farming and the Law’ available from www. claruspress.ie. The firm also specialises in personal injuries,


employment further law


and family law. She has of- fices in Dublin and Cork. For


information


please contact 01-602000 or 021-4270200. Email: info@walshand-


partners.ie Web: www.walshand-


partners.ie Disclaimer: While every


care is taken to ensure accuracy of information contained


in this article,


Solicitor Karen Walsh does not accept responsibility for errors or omissions howso- ever arising, and you should seek legal advice in relation to your particular circum- stances at the earliest possi- ble time.


@eastcorkjournal / #eastcorkjournal


info@eastcorkjournal.ie


Thursday, 22nd


February 2018


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