WHY DO I NEED BUSINESS PROTECTION?
Anyone in business today would not think twice about insuring their business against loss from fire or theft. However, there are many other circumstances that can have damaging and lasting consequences for your business. Indeed, without the right kind of protection, your business, even your family’s finances, could be seriously affected.
ASK YOURSELF THE FOLLOWING:
If any of the above questions are a cause for concern, you may need business protection.
IT WON’T HAPPEN TO OUR COMPANY!
There is little in life of which we can be absolutely certain -
However, the odds of one partner in a 2 or 3 person business dying or becoming seriously ill before retirement are probably a lot higher than you might think.
WHAT’S THE SOLUTION?
Many problems can arise for a business when a partner or key employee cannot carry out their role due to death or serious illness.
Some of these problems could be alleviated with adequate financial planning to provide the funds to allow options and choices to be made by all parties. Arranging adequate business protection insurance is the only way to ensure that the necessary funds will end up in the right hands at the right time, and in a cost-efficient manner, to help ensure the continuity and the survival of the business.
Ensuring the survival of your business, either when you pass it on to your children or in the event of a partner dying, requires careful planning. Your Financial Planning Adviser can assist you with putting together an arrangement to suit your business protection needs which will help ensure the continuing success of your business.
> KEYPERSON INSURANCE
This allows a limited company to plan for the potential financial loss that it would suffer on the death or serious illness of a key employee.
> PERSONAL SHAREHOLDER PROTECTION
This allows the shareholders of a limited company to provide funds for the purchase of the share of the deceased shareholder from their personal representatives with the life assurance contract effected by the shareholders personally.
> CORPORATE SHAREHOLDER PROTECTION
This is an arrangement whereby the company agrees with each shareholder to buy back the individual's shares from their personal representatives on death, with the insurance cost being borne by the company. This ensures security for the Company, and peace of mind for the family/dependants of the deceased.
> GIFT OR INHERITANCE TAX PLANNING
This allows you to plan for any tax liability which could arise on the transfer of a business, thus ensuring the business will not have to be sold off to pay the tax debts.
A pension plan is now accepted by most working people in Ireland as a natural part of their financial planning. With the State Pension, for most people, being much lower than earnings just before retirement, it is recognised that a private pension plan is necessary in addition to State benefits.
In this way, individuals and their dependants can enjoy greater financial security. A Revenue approved pension plan is the most tax efficient way to provide:
• A realistic income in later life.
• A level of financial security for dependants in the event of death.
A) PERSONAL CONTRIBUTIONS:
Income tax relief is available on personal pension payments between 15% and 40% of income (depending on age), subject to an earnings cap of €115,000. For a top rate taxpayer this can result in a saving of up to 40%, or up to 20% for a standard rate tax payer.
Income Tax Rate: 40% - 20%
Investment Amount: €5,000 - €5,000
Tax Relief: €2,000 - €1,000
Net Cost: €3,000 - €4,000
B) COMPANY CONTRIBUTIONS:
Contributions paid by your company to your pension plan are allowable as a trading expense, thus generating a corporation tax saving. Any such contributions invested by your company for your benefit are not treated as taxable in your hands (i.e. no benefit in kind tax). For company pensions such as Executive and Group plans, contribution limits apply. Contributions to a PRSA retirement plan are not subject to the same limits. All retirement plans have a fund limit.
Also, a company pension plan or a company paid PRSA is completely ring-fenced from the company’s assets, and so is protected from the company’s creditors.
C) TAX FREE INVESTMENT RETURNS:
Investment gains in a regulated retirement fund are not subject to tax.
RETIREMENT LUMP SUM:
On retirement a tax-free lump sum is available. For those who are self-employed (typically Schedule D Case I & II taxpayers) the retirement lump sum is up to 25% of the fund value. For directors and employees in defined contribution company pensions the limit can be up to 1.5 times final salary (subject to certain conditions) or 25% of the fund. For those in a PRSA the tax-free sum is up to 25% of the fund value.
The maximum tax-free amount in all cases is €200,000.
Retirement lump sums between €200,000 and €500,000 will be subject to standard rate income tax. The maximum retirement lump sum is €500,000.
The €200,000 and €500,000 limits include all retirement lump sums you have received since 7 December 2005.
Any further lump sum withdrawal from a retirement fund, where allowed, is subject to marginal tax, PRSI and USC.
PENSION ANNUITY INCOME:
The remaining fund can be taken as a pension annuity guaranteed for life. Pension income in retirement is subject to income tax and USC. Additional retirement options are available subject to pension rules and conditions.
APPROVED RETIREMENT FUND (ARF):
Where you take the option of the 25% tax-free sum or take no tax-free sum, you can re-invest the balance of your pension fund in an Approved Retirement Fund. This is a personal investment fund that you can manage and control in your lifetime. You can withdraw income as required subject to a minimum withdrawal of 4% or 5% depending on your age. A withdrawal of 6% is required if your funds are over €2 million. You can leave your ARF to your dependents on your death. Income and withdrawals from an ARF are subject to income tax and USC. PRSI applies up to age 66.
Warning: If you invest in these products, you may lose some or all of the money you invest
Warning: The value of your investment may go down as well as up
Warning: Returns may be affected by changes in currency exchange rates