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Pensions these days are pretty complicated contracts which simply shouldn’t be pretty complicated contracts. The whole purpose of a pension is to save money over your working lifetime so that you have enough, or at least something, put away to fall back on when income ceases. People are encouraged to save through a pension because the government allow you some tax relief and the pension itself allows the money you put in it to grow tax free making it a pretty attractive way to do things.
Now I could talk about all the different pension contracts that exist and the rules which state the contracts you can use depending on your employment status but this blog is about a particular contract called the Approved Minimum Retirement Fund or AMRF. The AMRF is a post retirement contract that you access after you have taken your pension benefits when you reach D Day. Without complicating this too much, if you decide to not buy a pension but look after your own investing whilst in Retirement then you will still end up with an AMRF, whether you like it or not!
So what is the purpose of an AMRF I hear you ask?
Back quite a while ago people were finding it difficult to put money away over the years to be forced to buy an annuity come retirement. The only option after all those years of saving was to leave your hard earned cash with a Life Assurance company and let them pay you a pension amount each year for as long as you lived. The issue was that as we hit a low interest rate environment the annual pension that your pot of money could secure was ever diminishing. As a solution the Approved Retirement Fund (ARF) was introduced. This allowed you, as an alternative, to manage your own funds and take income as you needed it but the proviso was you must also have an AMRF to the tune of up to £50,000 (€63,500 in modern money) and this pot could not be touched at all until age 75. This was seen to be a fall back fund if you messed up your main fund and spent it all too quickly. Sounds sensible really don’t you think?
The big problem now for a lot of people is that following the most recent crash and recession in 2008 their pension pots are not as large as they would like, so here lies the issue;
You have €100,000 total in your pension fund, once you deduct your tax free cash entitlement of 25% you are left with €75,000. You then have to lock away your €63,500 to age 75 leaving you with access to just €11,500 as your “main” fund. Now recent changes do allow you to take 4% of the AMRF each year but that’s it until age 75. It gets worse if your fund is smaller and quite simply if somebody has a small fund then it is likely that they need the money now, but they can’t have it.
This whole concept is quite outdated, is causing unnecessary stress to a lot of people and in my opinion serves no purpose today…. ABOLISH THE AMRF.
Karl Daly QFA FLIA
Co-Founder and Director
The shortlist for the CSR Awards 2017 was recently announced. The Chambers Ireland CSR Awards are partnered with Business in the Community Ireland , sponsored by BAM Ireland and run in association with the Department of Rural and Community Development.
Press Release with the announcement is online here
Details of the full shortlist is available here
The 2nd Small Business Innovation Research (SBIR) Ireland Public Sector Proposers Conference will be held on:
Date: Wednesday September 13th 2017
Where: Enterprise Ireland, The Plaza, East Point Business Park, Dublin 3
Registration Time: 08.15am – 09.30
Duration: 09.30am – 13.00 approx
Audience: This conference is open to all Specifiers/Procurers from across all sections of the Irish Public Sector
What is SBIR?
The Small Business Research Initiative (SBIR), is a mechanism enabling public sector bodies to connect with innovative ideas through technology businesses, to provide innovative solutions to specific public sector challenges and needs.
What is SBIR Ireland?
Small Business Innovation Research (SBIR) Ireland is the national innovation pre-commercial procurement initiative administered by Enterprise Ireland www.sbirireland.ie
SBIR Ireland’s aim is to drive innovation across all sections of the Irish Public Sector via robust engagement with technology rich companies and organisations, through competitive challenges. EI has established a fund to co-support worthy competitive challenges in partnership with Irish Contracting Authorities.
Background to Conference
This event is timed in advance of the release of a 2nd Call for SBIR Ireland Expression of Interest (Eols) Challenges to Irish Public Sector Specifiers/Procurers in Autumn 2017. The Eols will demand Contracting Authorities to outline bona fide SBIR Challenges for evaluation and if successful will receive funding support. It is anticipated that up to 10 SBIR Competitions will be funded over the period 2018 - 2019.
Speakers will include representatives from:
Please confirm attendance to firstname.lastname@example.org by COB Friday September 8th 2017
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Summer Holiday Reading –
Financial Advisor Style by Metis Ireland
Tales of asset allocation, investment opportunities, wealth management and murder in Sicily.
One of the most enjoyable things about summer holidays as one gets older and wiser is the pleasure to be had from reading at a leisurely pace.
Given that our family holiday was in the south east of Sicily this year, I was delighted to stumble upon the crime novels of Andrea Camilleri. The novels are set in Sicily and feature Inspector Salvo Montalbano who is almost as interesting a character as his creator.
Camilleri started the fictional series at the age of 70 and one of the novels in the series won the 2012 Crime Writers’ Association International Dagger – a nice way to celebrate his 87th birthday. It’s never too late to have big goals. More on Montalbano later.
I also decided to read some more serious books – again at a leisurely pace. The first was a third reading of Fooled by Randomness by Nassim Nicholas Taleb. Described as irreverent and written in an acerbic style by an author with an intimidating breath of knowledge, it is full of fantastic insights captured under imaginative headings such as:
A lighter – and certainly shorter – read is The Investment Answer which covers 5 decisions you should consider when managing your money and protecting your financial future. It also reminded me of one of my favourite quotes from John Kenneth Galbraith:
“We have two classes of forecasters: those who don’t know and those who don’t know they don’t know”.
It was very pleasing to note that the philosophy of this book is aligned with that of Metis Ireland. So, if you read this book and find it of interest, you know who to contact. Helpfully, my colleague Carl Widger, summarised the Metis Ireland rule book while I was away – click here to review. It will take less than 60 seconds and is not quite as irreverent as Taleb’s book!
A key insight is that we are sometimes our own worst enemies when it comes to making investment and financial planning decisions. In Metis Ireland, we have a mantra – Stick with the Plan – for a reason. Research has shown that investor return is consistently a fraction of investment return. In other words, individual investors do not beat the market. There are many reasons for this including a psychological herd mentality. We can show this visually:
This is because of the Emotional Cycle of Investment – irreverently summarised below.
There are plenty of actions you can take to avoid this damaging behaviour. We will be putting up a video to demonstrate why you should Stick with the Plan using a practical and Irish example.
Back to Inspector Montalbano to finish. The crime novels have been adapted for Italian TV and are very popular – they have also been shown on BBC with subtitles. The beautiful port village of Puntasecca is the location for filming and there happened to be a shoot on the day we visited.
The town was full of excited Italians waiting for a picture with the TV stars of the series. In a personal example of herd mentality, I couldn’t help but get in on the act. I have no idea who this very gracious lady is – role on the winter and some Inspector Montalbano on the TV so I can find out!
Summer Economic Statement Signals Prudent Long-Term Thinking by Government Capital Spending Commitments Important for Economic Growth
Chambers Ireland today (12 July 2017)welcomed the announcement by Minister Donohoe in the Summer Economic Statement of increased capital expenditure to meet the needs of a growing economy and society.
Ian Talbot, Chief Executive of Chambers Ireland commenting on the statement said, “The financial figures announced by the Minister of Finance today are as expected. With a limited amount of fiscal space available in Budget 2018 we welcome the Government’s approach to focusing on planning investment in the long-term. Expectations of a balanced budget in 2018, along with the projected healthy growth rates for the economy, means that Government will have more options for balancing prudence with investment and spending in coming years. Commitment to capital spending is key for business and we urge Government to invest in projects that align with the ambition of the evolving spatial strategy, the National Planning Framework.
“As part of our Pre Budget Submission 2018 we called for a review of our taxation system, particularly the entry point to the higher rate of tax, with a multi-annual plan for reform implemented over several budgetary cycles. We welcome the Government’s commitment in the Summer Economic Statement to reforming the tax system to ensure it is growth-friendly and we call for a medium and long-term roadmap for reform to be undertaken.
“This commitment to investment in infrastructure demonstrates again that Ireland is open for business and we look forward to continued economic growth into the future."
For further information contact Susan McDermott, Chambers Ireland on 01 400 4319, 086 6081605 or email email@example.com
Chamber News & Events
Read some of our past events and posts,