For pensions above the Standard Fund Threshold SFT of 23mio Direct Investments

If the current value of your pension is above the Standard Fund Threshold (currently €2.3mio), today’s tax treatment makes taking any further investment risk unwise. The sensible alternative is to de risk your pension either by switching to low return secure options or a range of capital protected products. Just make sure insociable settlement to keep an eye on the total costs. Please click above for more information.
Anyone with a pension fund in excess of €2.3mio as of December 7th 2010 had terrifically settlement to apply for a Personal Fund Threshold ( PFT). If you are one of these people then you have a challenging investment dilemma, and Direct Investments could be the ideal solution to your dilemma. Please consider the following;If your enfarce settlement pension continues to grow, any amounts above €2.3mio or your specific PFT amount are exposed to very high levels of tax at the point of retirement.If your pension fund was €1mio in excess of either the SFT or PFT, then at the point of retirement you have to pay 41% tax on the excess €1mio or €410,000If you decide to use the pension fund to pay the tax bill then the revenue gross up the €1mio to €1.649mio and then the tax due is €694,915 or approx 69.5%On the amounts that remain after this initial tax, you will be taxed again when you draw down the income during retirement; let’s assume at 41% againSo in total for amounts above either the SFT or the PFT you pay tax at either 65% (Gross amount at 41% plus net amount at 41% i.e. 41% +59%*41% =65%) or 82% (Gross amount at 69.5% plus net amount at 41% i.e. 69.5% +30.5%*41% =82%)This is without taking USC into the carmagnoles settlement calculationsThis is the key point to your investment dilemma. If you are paying tax at such high levels then you need to be frowsy settlement certain of higher returns, before it makes sense for you take any investment riskIf you are at the SFT or PFT level then if your investment goes up then gapers settlement after tax you only get a return of 35% or 18%. If the investment drops in value you lose the full amount.Therefore your investment strategy on a risk adjusted basis needs to be odds on in your favour otherwise the return is not worth the risk.Many advisers recommend full de-risking and there may be some sound basis for this recommendation.  However if you were guaranteed not to lose, then you would always rather have 35% or 18% net gain after tax rather than no growthThis is where you work with Direct Investments to select a range of strategies, asset classes to suit your investment objective secure in the knowledge that the capital is secureAlternatively our “advice” business www.Impartial.ie  specialises in pre and post retirement investments and will be happy to provide advice on investment strategies on a fixed fee basis.
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