The dust is now beginning to settle on Budget 2014.
It is clear that the Government is encouraging the public to put money back into the economy – to spend rather than save.
The clearest evidence of this is the D.I.R.T. increase from 33% to 41% and the Investment Tax increase from 36% to 41%.
That said, Retirement Planning has been relatively left untouched in the budget.
Retirement Plan – Tax Efficient Benefits to Save Money
(1)Â Tax Relief on Contributions:
All contributions into a retirement plan earn tax relief.
For example, an individual paying income tax on the 41% level now can claim 41% relief on any contribution they make to their retirement plan.
(2)Â Tax Free Growth:
All money held in a retirement plan grows tax free.
Therefore it doesnâ€™t suffer any D.I.R.T, Investment Tax or Capital Gains Tax.
(3)Â Bereavement â€“ Tax Free Lump Sum:
If in the event of death of a policy holder, the pension fund is paid as a tax free lump sum to the surviving spouse or to the policy holders of the estate.
If you are a member of an occupational pension scheme, terms and conditions do apply.
Generally, for personal pensions and P.R.S.A. the money is passed over tax free to the surviving spouse or estate.
(4)Â At Retirement â€“ Tax Free Cash & Tax Free Income
When you retire, you can claim a large portion of your money as a tax free lump sum.
The balance of your money can be set up to provide you with an income for the rest of your life.
However, you can earn up to â‚¬18,000 a year as an income in retirement without having to pay any tax for an individual; for a couple, this could be up to â‚¬36,000 per year.
This is a significant tax advantage for people in retirement and means you can build up a substantial retirement fund before any tax is paid on the proceeds.
(5) Post Retirement â€“ Approved Retirement Funds Tax Free Growth
If an individual, on retirement, takes their tax free lump sum and decides to invest the balance of their money into a Post Retirement Fund rather than into an income generating arrangement (Approved Retirement Funds) â€“ the money invested in these funds grow tax free, there is no D.I.R.T. or Capital Gains Tax.
These five reasons are clear evidence to the tax advantages of saving for a retirement plan.
If you are self-employed or an employee, Thursday, 31st October 2013 is a key date where you can make a contribution to a retirement plan and you will receive tax rebate or tax relief in relation to your income earned in 2012.
Contact Inverdea today on (0404) 67123 to see how we can help.
Download Inverdea Budget Update 2014.