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Case Study 2 – Normal retirement age approaching for Executive Director

Client: Executive director in family run business, age 59, married, combined income €83,000 all children financially independent. Adequate protection in place, no mortgage or loans.

Primary concern, his retirement plan, normal retirement age 65. At time was saving €1,500 per month from after tax income.

Retirement Fund:- modest fund value with large funding gap for adequate pension, large exposure to under-performing property funds, company contributing €500 per month. Own contribution nil. Company cost management program meant salary was cut and company contribution cut.

Planning/advice

We first assessed risk profile for client and current risk profile of his funds. We arranged fund switches to align with his attitude to risk. Once reduced company contributions were implemented, we assessed affordability for additional voluntary contributions (AVCs). Client is a high rate tax payer making significant after tax savings each month. We assessed marginal tax relief range and there was a compelling argument to commence AVCs to his own executive pension.

Two years on, and client has contributed both regular and single contribution AVC’s to avail of high rate tax relief, and has more than doubled his retirement fund. We review funds and value each 6 months and have a strategy in play to remove risk gradually from the fund as he approaches his retirement date. To this end we are implementing a portfolio re-balancing and risk reduction strategy.

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