Business Solutions

Taking care of your business

Group Risk and Pension Scheme Benefits

Offering your employees Death in Service, Income protection and Pensions benefits will help retain staff and enhance employee satisfaction.

One of the main challenges for businesses is to attract and retain good staff. Having a comprehensive employee benefit package, such as pension, death-in-service, and income protection benefits, can really put you ahead of the competition.

Proposition

At Murray & Spelman Financial Services we have the track record and experience to ensure the management of the Pension Scheme runs smoothly for your Business, the Management team and Employees.

We will arrange an initial comprehensive presentation followed by periodic presentations to scheme members to explain how their pension plan works, their investment options and the other employee benefits provided by your Business.

The key elements in the delivery of this service are proposed as follows:

Employee / Member engagement

We will design an engagement plan which will include the following advisory services:

Employee Benefit Package – we will actively promote the Pension Scheme and associated benefits to all members of staff through group presentations, video calls and one to one meetings. We will help members to engage and understand their retirement planning process to enable them to better prepare for their retirement.
Pension Funding Review– we can analyse members pension position, by looking at member target pension, contribution level and pension investment performance.
Financial Wellbeing / Personal Financial Reviews – when requested by the members, we will advise on their day to day personal financial arrangements to ensure their goals will be achieved. This includes, pensions benefits accrued from previous employment, Life & Serious Illness cover, Mortgages and Savings/Investments.
Joining the Pension Scheme – when new members are joining the pension scheme we will engage with and advise the member as to how the scheme works and the benefits.
AVC Investment– we will advise and encourage Additional Voluntary Contributions (AVC’s), in addition to member pension scheme contributions. Illustrations on how AVC payments can enhance member retirement benefits will be explained.
Leaving Service Options– when leaving service, we will advise on member leaving service options.
Retirement Advice – when members have reached their retirement age, we will engage with them on the retirement options available to them, maximising their Tax-Free Lump Sum, advantages/disadvantages of Annuities v’s Retirement Funds. The purpose here is to cut through the jargon, to empower the member to choose the best option for them based on their circumstances.
Risk Benefits – these benefits are generally undervalued and misunderstood by employees until they are needed (family benefits on death and disability).

It is important that we assist employee understanding of the pre and post retirement planning issues with pensions. It will contribute to the feeling of financial wellbeing.

New or Existing Schemes

Issues to consider when setting up or accessing existing schemes

Vesting Rights
Employment Categories
Risk Benefits
Trusteeship
Pension Pricing
Bundled 0r Unbundled
Provider Assessment
Emerging Legislative Obligations – IORP II, (Auto Enrolment)

Group Risk

Employers can provide Group Risk Benefits to their employees under three heading:

Group Life Insurance (Death-in-Service) ensures that an employee’s family or dependents will be financially provided for in the event of the employee’s death. Payment to the employee’s dependents can be made via Lump Sum, Spouse’s Pension or Children’s Pension.
Group Income Protection, (Permanent Health Insurance – PHI) protects your employees from loss of income due to long-term illness or injury. Income Protection is designed to provide an income for employees if they are unable to work for a prolonged period of time due to illness or injury. Payment begins once a predetermined period called the “deferred period” has passed since the onset of the condition leading to the claim.
Group Serious Illness Cover pays a lump sum to employees if they are diagnosed with one of a number of specified serious illnesses. A serious illness payment will be made only once. It provides a lump sum (and, sometimes, a dependent’s pension benefit) on the death of a member of a scheme.

Why would an employer set up Group Cover for their employees?

As an employer you can write off the full cost of providing the benefits against corporation tax.
Recruitment and Retention of employees
It is an attractive benefit to offer current and future employees.
The underwriting requirements for group life assurance are much less stringent than for individual life assurance cover.
Some employees who may not qualify for individual cover, may qualify group cover
As cover is organised on a group basis, costs are significantly lower than equivalent individual life assurance cover.
Administration much more straightforward than purchasing equivalent life assurance cover policies for each individual employee.
Employer contributions to a pension are treated as a business expense and are not subject to Employer PRSI
Employer contributions do not count towards the individual’s Revenue limits

Auto-Enrolment

The Irish Government is planning to launch an auto-enrolment pension scheme from 2022. Automatic enrolment in Ireland is being mooted as a measure that, if introduced, could bridge the pension gap.

The State pension retirement age has been in the news a lot lately. Will the qualifying age be extended upwards or be reduced back down?

Pension Time Bomb
You may have heard the above term in the news. What does it mean and why should it concern you? It’s all down to Irelands demographics! For every, one person who retired in 2019 there were five workers – by 2050, for every one person retired there will be only two workers!

If introduced, automatic enrolment would oblige employers to introduce a workplace pension scheme and automatically enrol their employees into the scheme. Employers would then be obliged to contribute a percentage of an employee’s salary to help fund their retirement.

The Government is also supporting this idea to bridge the pension gap. This gap exists and will certainly continue to grow because the State pension will not be sustainable in the future due to increasing life expectancy and an ageing population.

Corporate Investment Bond

What do we do with our company’s money?

We see more companies exploring alternative investment opportunities – in particular investigating how Corporate Investment Bonds and Savings Plans can be a solution. Holding your company’s money in cash or on deposit may make sense for maintaining short-term cash-flow but is this the most appropriate use of the surplus capital?

Over the last number of years holding too much cash has been costly. Investing with a Life Company can be more efficient! Traditionally companies have invested directly in deposit accounts or through direct equity/share purchase, it can bring unwanted tax complications.

Solution

An alternative route is to invest surplus capital in a Life Company Investment Bond or Savings Plan. For ‘Close Companies’* this can potentially be more efficient for a number of reasons:

Company investments only have to pay an exit tax of 25% and are not subject to the potential 33% tax paid on any gains made on direct investment in equity or property. There is no further tax liability.
The Close Company surcharge of 20% for undistributed income does not apply to funds held within a life insurance investment bond or savings plan
Reduced tax and payment administration – It is the Life Insurance company that is responsible for the withholding and payment of any tax and not the Close Company itself.
There is the potential to defer payment of tax until the 8th Anniversary of policy. While reducing the tax burden, this also has the added advantage of compounding growth over time compared to where income may be paid annually on direct investments.
A life company Investment Bond or Savings Plan will typically offer a wide range of fund options offering different levels of exposure to Commercial Property, Equities, Bonds etc. The choice may allow the company to diversify its investment options depending on the risk profile of the company (or its directors).
Please note that a government insurance levy of 1% currently applies to all contributions to life assurance products.

*What is a ‘Close Company’?:

A Close Company is one that is controlled by five or fewer participators or is controlled by any number of participators who are directors.
The definition of a Close Company includes a company where, on distribution of its full income, more than 50% goes to five or fewer participators or participators who are directors.
A participator is a person having an interest in the income or capital of the company.
Most SME companies in Ireland are Close Companies.

Business Protection

A business insures its building, its machinery and stock. But often management and key personnel are the most important and valuable assets!

How would your business survive if:

One of your key employees or shareholders became seriously ill or died suddenly?
Your business partner died?
What would happen to their share of the business?
How would you feel about a shareholder’s family joining your business?
If you died, what would happen to your share of the business?
Are your spouse or children in a position to take your place in the business?
How will your family survive financially?

These questions should be a cause for concern for every business. You need to talk to about Business Protection.

Arranging adequate business protection insurance is the only way to ensure that the necessary funds will be available, in a cost-efficient manner to ensure the continuity and the survival of the business.

Areas of Business Protection that we at Murray & Spelman Financial Services Ltd will advise your business includes:

Co-Director Insurance

The directors of a company are often the major shareholders, who make all the key decisions. A successful business depends on the close cooperation and experience of the directors. The death of one of the directors can have a serious impact on both the surviving directors and the deceased’s successor(s). The remaining directors may be faced with a new shareholder and director who has little business expertise or a person they would rather not work alongside. Disagreements may arise if the deceased’s successor(s) has different plans for the future of the business. Ideally, the remaining shareholders/directors or the company would buy back the deceased’s shares but may not have sufficient funds available to do this. The deceased’s successor(s), on the other hand, may not wish to become involved in the business and might find it difficult to sell their shareholding. They might indeed welcome a cash sum at this difficult time.

Co-Director Insurance gives the directors of a company the peace of mind that there will be funds available to them, to buy back his/her shareholding from his/her successor(s) should one of them die, thereby maintaining their control of the company.

Partnership Insurance

A Partnership arises when two or more sole traders come together and share the profits or losses of that Partnership. The death of one of the partners can have serious financial consequences for those left behind in that business. Partnership Insurance will protect the financial security of the partnership by making sure that funds are available to compensate the deceased partner’s estate for his/her share of the Partnership.

Keyperson Insurance

When running a business, it is vital to consider and plan for events that could adversely affect its success. In particular, it is important to consider the implications to a business of the sudden death or serious illness of an essential employee – a key person in the business. Having Keyperson Insurance in place will minimise the financial impact of losing key employees. The employer pays the premiums and in the event of death of the insured, a cash sum is provided which will help to maintain the business and protect its future security

The death or diagnosis of a serious illness of a keyperson could put a business in a financially unstable condition in a number of ways:

An interruption of business activity and a consequent reduction in profits.
Bank loans on which the keyperson gave a personal guarantee may be called in.
The keyperson may be due repayment of any loans made by him/her to the company.
Banks and/or suppliers may reduce or withdraw credit facilities over worries about the future profitability of the business.
The loss of the individual’s expertise and business contacts.
The need to commit resources to find a suitable replacement. This may be a prolonged process if the individual had unique experience and expertise.

Typical financial planning areas we assist on:

Life & Serious Illness Cover
Mortgage Protection
Income Protection
Inheritance Planning
Pension & Retirement Planning
Investments
Savings

Murray & Spelman (Financial Services) Ltd guarantee:

To provide impartial, unbiased financial planning advice.
To research the market for the most suitable option available to you.