Download How to Maximize Your Funding Opportunities

How to Maximize Your Funding Opportunities
While most company directors have the scope to target a fund of 2.3m (Standard
Fund Threshold), the reality is that most are nowhere near that level.
Let’s take a look at a typical example:
• John is 45, married and has been running his own business for 10 years
• He is drawing a salary of 60,000 p.a. and wishes to retire at age 65
• He is currently contributing 20,000 p.a. into a directors pension plan which has a current value of 50,000
and a projected value of 850,000 at NRA
• Based on his salary and service details, his company could provide him with a retirement fund of 2m (Revenue maximum fund
allowed)
Assumptions: Projected values are based on 6% growth rate with 100% investment and a base FMC of 0.75% (Consensus).
John has the following options in order to
provide his Revenue maximum fund:
Option
New Single Premium Contribution
1
€330,000
New amount
2
€50,000
New amount
3
Nil
New Regular Premium Contribution
€23,000
i.e. €3,000 New top up amount
€50,000
i.e. €30,000 New top up amount
€54,000
i.e. €34,000 New top up amount
• Option 1 would provide a fund of 1.9m. (6% gross p.a. investment growth assumed).
• Options 2 & 3 would provide a fund of 2m (Revenue maximum). (6% gross p.a. investment growth assumed).
Warning: These figures are estimates only. They are not a relaible guide to the future performance of
this investment
How John can reach the 2.3m Standard Fund Threshold
For John to take full advantage of the 2.3m Standard Fund Threshold, he could increase his salary which would increase his current
Revenue maximum funding limit from 2m up to 2.3m.
How would this work in practice?
If John increases his salary from 60,000 to 68,000, the associated fund required to produce Revenue maximum benefits would also
increase to 2.3m. To target this new higher fund, John pays an 8,000 Additional Voluntary Contribution to his company pension plan
each year – his new overall pension contribution level therefore would increase from 54,000 per annum up to 62,000 per annum
( 54,000 Employer & 8,000 AVC).
Benefits to John
4 A 15% increase in his retirement fund ( 2.3m versus 2m)
4 An additional 60,000 after-tax retirement lump sum {Increase in fund 300,000 X 25% Less 20% Standard Rate Tax}
4 No additional income tax liability as the AVC contribution would offset his 8,000 salary increase – he would however pay slightly
This information has not been prepared based on the financial needs or objectives of any particular person, and does not take account
of the specific needs or circumstances of any person.