Sunday 25 June 2017

As a small business owner, do I need to get ready for compulsory pensions?

The Revenue Commissioners need to say sorry to a large group of pensioners who have been overcharged as a result of holding both State and private pensions
The Revenue Commissioners need to say sorry to a large group of pensioners who have been overcharged as a result of holding both State and private pensions

I run a modest but growing window and glass-fitting company and I currently employ 20 people. I've read recently that the Government plans to put into place a form of compulsory retirement savings scheme. While I can see the merits in this, I'm concerned that the set-up costs and the cost of running a scheme like this will be more than my business can bear at the moment.

Donal, Clones, Co Monaghan

This is a difficult one to answer succinctly as there are a lot of factors at play and a lot of questions around what form the mandatory pension scheme would take if or when the Government puts it in place.

What I would say, however, is that you may be a little premature in your concerns about the impact of a universal pension plan on your business. Government initiatives generally run slowly and, based on experience in other countries, this will be a massive project so it is unlikely to hit you, your employees or your business for a couple of years. Even then, other countries have introduced their systems gradually. So you have ample time to prepare yourself. And with the upturn in the economy, your business may way be in a more stable and profitable position by the time this is introduced.

For the moment, I would advise you to engage the expertise of a financial adviser or benefits consultant and consider your options. You might look at how you can pre-empt the Government scheme with your own scheme, partially paid by the employees, the taxman and you. A little pain for everyone, but it may be the best option for your employees. Don't forget that you're already obligated to assist them in taking out a PRSA (Personal Retirement Savings Account), although you don't have to pay anything into it.

I'm a 49-year-old woman working as a medical rep. I have been with the same company for the past 16 years and have been a member of an employer defined contribution pension scheme since I began. It occurred to me recently that in all that time I have never given any thought to how my pension is faring or whether or not I should be looking at how and where my fund is invested. Should I be doing my homework on investment choices and so on, or can I leave all this to the experts - and never really get involved?

Angela, Carrickmines, Dublin 18

Yes, you should be giving your pension some attention. As a typical 49-year-old, you probably have a home and mortgage, a car and maybe some other assets you've acquired over the years but, unless you have paid off your mortgage, your pension is probably your single most valuable asset.

You'll need to take more comprehensive advice, but to start with you could take the following steps:

• Try to estimate when you'll need to draw down your pension, taking into account your State Pension won't be paid until you are 68.

• Consider how much income you will need for the lifestyle you would like in retirement.

• Check how much you have saved now and how much extra you will require to have that lifestyle.

• Decide whether you should be paying more in, and remember your employer will often pay more in if you do.

• You should also decide on the level of risk you take. Generally, the longer you have the fund, the greater the risk you can afford to take. Risk is double-edged; take too much and you could suffer some loss over the short or long-term, but take too little and your money may not grow as much as you would like. In a typical pension fund, the bulk of the money at retirement will have come from investment growth rather than from your contributions.

Talk to your HR Department or trustees or even get independent professional advice. It is possible your pension scheme's benefits consultants or investment managers have online tools that will allow you to check a lot of this easily.

My son is starting secondary school in September and we have to buy him a new tablet. My son will be taking the tablet to school each day so I was wondering if I should buy insurance in case it is stolen or gets broken.

I think the shop that sells the tablet also offers insurance. What would you advise?

Mandy, Douglas, Co Cork

When you buy expensive electronic equipment, it makes sense to want to protect yourself, but insurance for electronic goods such as tablets or mobile phones can be quite expensive. There are a few things to think about before you sign up to any policy.

First, check with the school if they are offering a scheme for buying the tablets. If you are buying it through the school, it may come with a manufacturer's warranty that will cover any manufacturer's faults for a period of time. However, if the tablet is lost or damaged by neglect or misuse, it may be your financial responsibility to replace it.

Find out what - if any - cover you may have under your existing home or contents insurance policy. 'All-risks' cover is an optional extra under most home insurance policies and protects you against loss or theft of, or accidental damage to, personal belongings both inside and outside of the home. Check exactly what is covered and ask your insurance provider about any exclusions, and mention that it will be your son rather than you using the tablet.

Find out if there is an excess to pay on the policy if claimed and consider the implications of that.

It is always important to remember that if the product develops a fault after you buy it you have statutory consumer rights. For more information, visit www.consumerhelp.ie.

I will be retiring shortly from the public service. I have been on rostered overtime for the past year. Can you advise if this will be taken into account when calculating my pension?

Maureen, Mallow, Co Cork

Without knowing more it's hard to give you a definite answer. In short, it depends. According to the relevant sections from the civil service's 'Superannuation Handbook', your question revolves around what is termed 'pensionable remuneration'.

Your lump sum and pension will be calculated by reference to pensionable remuneration and reckonable service. Pensionable remuneration is the combination of your pensionable salary and what are called 'pensionable emoluments'.

You need to check whether the rostered overtime has been approved by the Department of Finance as a pensionable emolument. Your HR department should be able to assist you with this query.

 

Email your questions to jcradden@independent.ie or write to 'Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1'.

While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.

Jerry Moriarty is chief executive of the Irish Association of Pension Funds

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