Tax Changes & Your Pension Contributions

In September 2009 the Revenue Commissioners introduced new rules which may affect the tax relief you can claim in respect of your pension contribution if you:

· Pay into a Contributory occupational pension scheme AND

· Have a personal pension or PRSA in respect of private income.

This ruling requires that any additional personal contributions made must first be made by way of an AVC Type Policy.

It is very important that you review your current contribution methods and in particular any monthly contribution policies you may be paying into so as to ensure that your contributions attract maximum tax relief. IMO Financial Services will be pleased to assist you in any queries you may have in this regard or if you would prefer we are happy to undertake a financial review of your current arrangements.

If you wish to meet with a financial advisor please click here.

Why PRSA AVCs

The main reasons for investing in a pension is to reduce your tax liability and of course, to provide for your retirement. You will receive tax relief at your marginal rate up to certain limits, investment growth is free of tax (not subject to DIRT as with regular investments) and you may be entitled to a tax –free lump sum on retirement.

Most doctors are members of an occupational pension scheme.

Consultants, Public Health Doctors and NCHDs are most likely attached to the HSE’s Defined Benefit Scheme, where your pension entitlement and lump sum are determined by years service.

GMS GPs are likely to be members of GMS Defined Contribution scheme (Mercer), where your final pension is determined by the contributions made and the investment growth achieved.

The Pensions Earnings Cap has reduced to 150,000 from January 2009. Any doctor in receipt of a salary or GMS income of 150,000 or more, who wish to make extra pension contributions over and above the deductions from their salary or capitation fees, can only invest in an AVC Policy (Additional Voluntary Contribution)

You must maximise your pension entitlement based on your HSE or GMS salary before addressing any private pension entitlements. With the reduction in the earnings cap, anyone earning 150,000 from the HSE or the GMS most likely do not have any personal pension entitlement.

You can invest your AVC through the main body of your occupational pension scheme or in a Standalone PRSA AVC. The main advantages of a standalone PRSA AVC are:

ü Choice of provider – you can search the market for the best deal

ü Choice of funds – you can invest in funds that suit your attitude to risk

ü Transparent Charges – charges and allocations are capped

You can also avail of enhanced allocations through IMO Financial Services.

For more information on PRSA AVCs or to meet with one of our advisors contact:

Carol Dermody on 01 6618299 or cdermody@imo.ie

Fitzserv Consultants t/a IMO Financial Services is regulated by the Financial Regulator