adding value to your clients & your business...adding value to your clients & your business...
TRANSCRIPT
Aviva: Confidential
Adding Value to Your Clients & Your Business
For Financial Broker Use only
Aviva: Confidential
Your Presenter
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Professional Trustee Partner
Stephen Rice – Investments & Pensions Propositions Manager
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Professional Trustee Partner
Utilising the full range of pensions products to build long term client relationships will assist in developing a
sustainable business.
Aviva: Confidential
Agenda
Consolidation of benefits
Corporate clients
Key Milestones
Q&A
Pensions Adequacy & AVC’s
Why consider Personal Retirement Bonds (PRB’S)
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Aviva: Confidential
Why consider a Pension?
Happy 100th birthday!
456 People
141 People
0 People
The Centenarian Bounty was paid to …
1946 2005 2017
People are living a lot longer!
As a result of people living longer by 2050there will be more people in retirement thanin the workforce.
Therefore, fewer PRSI contributions will bepaid towards the State Pension but morepeople will be in receipt of it.
It’s worth remembering you may not have as many pay days left as you think
This chart assumes that you will retire age 68 and are paid calendar monthly
YOUR AGE
PAY DAYS LEFT
20
576
25
516
30
456
35
396
40
336
45
276
50
216
55
156
60
96
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The State Pension is it sufficient?
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The Full State Pension = €12,911.60 per annum/€248.30 per week
What does this look like as salary replacement …
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The Key Drivers of Adequacy
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ContributionsInvestment
Returns Adequacy
As salaries & expectations change, the role of the broker is pivotal in ensuring customers are funding to the appropriate levels throughout their life cycle.
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How to help assist your client with adequacy
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Contributions
Review contributions with your clients regularly – regular discussions about salaries.
Open discussion in relation to contributions single and regular.
Paying single contributions – AVCs, bonus …
Tax Relief – ensure your clients are utilising the maximum available relief on contributions.
Consolidation - transfer of benefits from other pension sources/previous employments.
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Additional Voluntary Contributions
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For Brokers Engaging with Employers & Scheme Members on AVC’s;
• Emphasise part of your service offering.
• Usually no cost to the Employer, but value add service to member.
• Opportunity to offset bonus or commission payments as tax relief available against all earned income.
• Contributions are flexible and can be increased or decreased as a members financial position changes.
• Provides the broker with opportunity for individual reviews with members to build stronger
relationships.
Those who are not fully funded
Those not
utilising full tax relief
Almost everyone
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Additional Voluntary Contributions
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Take Louise, who is 41 years old andwho earns a basic salary of €48,000 per year & a €6,000 bonus/commission
Louise pays tax at 40% and contributes €200 per month to an occupational pension scheme & €200 a month in AVC’s, which is matched by her employer. The net cost of a total pension contribution of €400 per month is just €240
Monthly Contribution
Tax Relief Net Cost
Regular Contribution
€200 €80 €120
AVC’s €200 €80 €120
Total €400 €160 €240
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AVC’s The Benefit of Tax Relief on All Earned Income
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Take Louise, who is 41 years old andwho earns a basic salary of €48,000 per year & a €6,000 bonus/commission
• €13,500 total contribution Louise could make (€54k income * 25% tax relief)
• €4,800 regular contribution including AVC’s
• €8,700 contribution gap
• €6,000 bonus/commission can be used to fund this gap
Monthly Contribution
Tax Relief Net Cost
Regular Contribution
€2,400* €960* €1,440*
Regular AVC’s €2,400* €960* €1440*
Single AVC’s €6,000 €2,400 €3,600
Total €10,800 €4,320 €6,480
* Annualised value of monthly contributions
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Fund Choice – What should be considered
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Consolidation of Benefits
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Professional Trustee Partner
• Economies of scale - potentially lower management charges for a larger fund.
• The benefits available could be more under your new arrangement.
• A new arrangement could offer benefits which their existing plan doesn’t.
• Only one set of retirement options and documents to complete.
There are pros and cons of considering consolidation and this is where advice is important for customers to make the right choice;
• Potential early exit penalties.
• Loss of any guarantees or benefits.
• Older schemes may allow you to take more than 25% cash tax-free.
• There may be differences in fund charges and fund selection (may also be a pro).
CONS
P R O S
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Personal Retirement Bonds
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There are benefits to all 3 parties in discussing the merits of Personal Retirement Bonds with Employers and Members.
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Personal Retirement Bonds
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Removes responsibility for an ex staffs pension benefits. Don’t assume they know their on-going responsibilities
especially where they are the Trustee
Protects employer from any potential comeback re performance or investment management etc…
Ensures no lasting ties with an ex employee for your firm
Benefits for the Employer
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Personal Retirement Bonds
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Allows member take ownership of their benefits
Removes requirement to try and source trustee at retirement
Opportunity to invest in a wider range of assets
Benefits for the Member
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Personal Retirement Bonds
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Adding value to the employer by protecting them when members leave to future oversight on pensions
Builds direct relationship with an individual which you may not have had
Endorses direct engagement with scheme members
Benefits for the Broker
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Corporate Clients
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Professional Trustee Partner
Companies own assets Directors pensions & insurance
Staff pensions & risk benefits
Referrals and family benefits
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Group Scheme Members – A potential client for life
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Ability for the broker to build a long term relationship with the scheme member and potentially benefit from cross sell opportunities.
Term Assurance Pensions
Mortgage Protection
Post Retirement
Opportunity
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Key Milestones Before Retirement
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5 Years to Retirement
12 Months to Retirement
6 Weeks to Retirement
• Review fund choice• Highest rate of tax relief on contributions applicable now• Consider consolidation of benefits to one policy• If considering A(M)RF post retirement change lifestyle strategy so
investment continuity occurs
• Retirement Options and requirements issued to the Trustee/individual & Broker
• Prepare documents required for retirement
• Ensure individual are aware of their pension benefits from previous employment(s)
• Review other personal financial obligations
Aviva: Confidential
Questions?
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Aviva Life & Pensions Ireland Designated Activity Company, a private company limited by shares. Registered in Ireland No. 165970.Registered office at One Park Place, Hatch Street, Dublin 2, D02 E651. Aviva Life & Pensions Ireland Designated Activity Company, trading as Aviva Life & Pensions Ireland and
Friends First, is regulated by the Central Bank of Ireland.