The Gazette 1992

GAZETTE

Retirement Planning - It's Never Too Early to Start!

ma k i ng a n n u al p a yme n ts or p a yme n ts of any specific a mo u n t. I nd e ed the m i n i mum c o n t r i b u t i on currently required in a year is a mere £500.

have been increasing a n n u a l ly a l t h o u gh the current memb e r s h ip of 450 still represents quite a small percentage of qu a l i f i ed solicitors in the country.

by Harry Cassidy

Ma ny self emp l oy ed people wait until it is t oo late to start t h i n k i ng a b o ut retirement a nd their likely pension requirements. Do you fall into this category?

Main Advantages

Performance

A key feature of the Plan is its very low entry costs thus providing key benefits to young solicitors in the early years. T he initial a nd ongoing charges of the Retirement Annuity Plan are also lower t h an those of any other life assurance scheme available at present. T he initial entry charge is only 2 . 5% of each sum invested a nd the ongo i ng ma n a g eme n t, administration a nd investment fee is only 0 . 6% per a n n um. No rma l l y, mo st insurance schemes carry an entry charge of at least 5% with ma n a g eme nt fees ranging f r om 0.75 to 1%. Such a high level of charges would obviously have a negative effect on investment levels a n d p e r f o r ma n c e. In a d d i t i o n, the Law Society Retirement P l an h as the following benefits:

Wi th increasing u n c e r t a i n ty s u r r o u n d i ng f u t u re taxation

A l t h o u gh we c a n n ot g u a r a n t ee the rate of return of the P l a n, particularly in current ma r k et c o n d i t i o n s, o ur objective as F u nd Ma n a g e rs is to achieve a real rate of return substantially in excess of i n f l a t i o n. T h e returns of the past six years a nd the first six mo n t hs of this year are s hown in the chart below. As you can see, the Law Society P l an h as p e r f o r med very favourably in c omp a r i s on with the ma in insurance c omp a n i e s. In a d d i t i o n, it s h o u ld be r ememb e r ed t h at all gains m a d e within the F u nd are completely tax-free. T h e P l an o f f e rs solicitors considerable flexibility in the choice of f u n ds at their disposal. A solicitor can c h o o se to invest in the Ma n a g ed F u nd (which is a b r o ad spread of equities, gilts, p r o p e r ty a n d cash) or in the Ca sh F u n d. Typically, in t h o se years immediately prior to retirement, the Ca sh F u nd is a beneficial o p t i on since it allows p a r t i c i p a n ts to protect a c c umu l a t ed gains. Fund Options

provisions a n d the reduction of allowances a n d reliefs, o n e of t he mo st attractive tax b r e a ks available to self-employed professionals is in the area of p e n s i on c o n t r i b u t i o n s. Un d er current legislation, all c o n t r i b u t i o ns to a u t h o r i s ed p e n s i on plans are fully deductible against i n c ome tax at the t op rate. Th is is subject to an overall limit of 15% on net relevant e a r n i ngs per a n n u m. T h e d e a d l i ne for c o n t r i b u t i o ns to achieve full tax relief, however, is 31 J a n u a ry following the year of assessment. To avail of tax relief for the year of assessment 1991/92, the d e a d l i ne for c o n t r i b u t i o ns is only six weeks away, namely 31 January, 1993. While this brief article does not allow time to outline the detailed tax c omp u t a t i o ns of p e n s i on c o n t r i b u t i o n s, I wo u ld like to bring to your a t t e n t i on o ne of the mo st attractive a nd beneficial p l a ns available at present, namely, the Law Society Retirement An n u i ty P l a n. T h e b e n e f i ts of this u n i q ue P l an are not c o n f i n ed to the tax a d v a n t a g es outlined above b ut include specific cost a n d structural features. T h e I n c o r p o r a t ed Law Society established a Retirement An n u i ty P l an in 1975 to provide its memb e rs w h o are self emp l oy ed or in n o n- p e n s i o n a b le emp l o yme nt with the o p p o r t u n i ty to provide for their retirement d u r i ng their wo r k i ng life. T h e n umb e rs involved in this P l an Retirement Annuity Plan

• No initial units.

• No charge for switching between f u n d s.

• No penalty charges for ceasing c o n t r i b u t i o n s. T h e P l an o f f e rs c omp l e te flexibility in t h at p a r t i c i p a n ts are not tied to

Year to 30/6/92

87

91

90

89

88

86

Irish Law Society Pension Fund Irish Life Managed Fund Standard Life Managed Fund

(9.4)

19.2

7.4

17.3

26.9

20.8

5.5

12.4 (1L2)

22.1

19.8

10.9

(0.5)

26.1

16.4

14.1

20.8

2.2

15.6 (14.8)

29.0