Mid-Year Market Review – July 2024

An Encouraging First Six Months
The continued strength in global markets has continued into the first half of 2024. The main indices continue to be driven by a handful of mainly technology stocks. The primary driver continues to be excitement around A.I., helped by some very positive earnings reports. The ‘poster child’ here (NVIDIA) rose by 31% in Q2, despite a drop of 11% in the latter part of June. This is after a rise of 84% in Q1 and having trebled in 2023. During June it briefly became the most highly valued company on world markets.

* Inflation figure based on the CPI to July 2024

Bond Returns Weakening
This does however go against the grain of weaker bond markets. The expectation for the US markets was for up to 6 interest rate cuts in 2024, this is now reduced to one or possibly two before year end. Hence it is no surprise that bond returns have been negative and also highlights the folly of following forecasters. Inflation data in the US and Europe has been the main cause of the change, with inflation relating to services proving stubborn. The ECB and the Bank of Canada however did cut rates, by 0.25% in each case.

French Election
Eurozone bond funds and indices were hit late in Q2 by changing perceptions about the composition of the next French government. The spread on French bonds over German bunds widened sharply. Interestingly, and little covered in the media, France’s sovereign debt was downgraded from AAA to AA by Standard & Poors in May. This was before the political picture changed and was based on the deteriorating budgetary position.

Geopolitical Tensions
While macroeconomic conditions have stabilized, with rate cuts aligning with falling inflation and the advent of AI and quantum computing heralding a new era of productivity, geopolitical tensions are at their highest since the Cold War. The situation in Ukraine, serving as a proxy war involving Russian clashes with US-led NATO, signals a global conflict. China’s quiet support of Putin and actions that seemingly undermine Western interests hint at an agenda that may include aspirations towards Taiwan.

European Reluctance To Face Reality
There is a noticeable hesitance among European politicians – apart from those from Finland, Sweden, the Baltic States, and Poland – to acknowledge the likelihood that Putin’s imperialist ambitions extend beyond Ukraine, with Moldova most likely next in line. The situation is complex with the conflict in Ukraine eventually stabilising into a frozen state unfortunately for the Ukrainians.

Gold Price At All Time High
The volatility of the geopolitical landscape continues to influence the gold market, with prices up by +13% in USD and +16% in EUR this year. Since 27th June 2019, before the quantitative easing that accompanied the lockdowns, gold has risen by +74.45% from €1,241 (see FT article Gold Prices Hover Near Record High). Should geopolitical risks diminish, we may be on the cusp of a long-term bull market in natural resources, including oil, gas, and coal – ironically all essential for the transition to zero carbon.

A.I. Power Market Growth
The recent domination of major index movements due to a small number of companies has been quite remarkable. Apart from the sheer scale by which these stocks have dominated returns, the legend indicates that change in valuation has accounted for the bulk of return. The scale of the growth in these stocks means that global equity indices are more concentrated than has been the case for six decades with over 21% now made up of this small number of stocks.

You Don’t Need To Pick Winners
While anyone who owned significant amounts of NVIDIA shares would have done very nicely, it’s not obvious that investors should now be buying the stock if they don’t already own it. As companies grow, the market’s expectation for continued earnings growth means that any future disappointments will be heavily punished by the market.

Owning The Worlds Major Indices
However, more importantly, it is worth remembering that you are already an NVIDIA shareholder if you are invested in a diversified global equity fund. These funds track the world’s major indices, like the S&P 500. NVIDIA was added to the S&P 500 index as far back as 2001. As it has grown over the years, global equity funds have steadily increased their ownership of NVIDIA, meaning that most investors have benefited from its meteoric rise in share price.

Reduce Your Stress Levels
Global equity funds, which include the market’s top companies, save you from the guesswork and stress of picking individual stocks. This same story is likely to play out many times in your lifetime. As new companies rise to the top, your share of them will also. Interestingly, Microsoft is the only top ten stock from 1999 still in the top ten 25 years later.

Protection Of A Diversified Portfolio
Companies that make the news for exponential growth almost always experience periods where they lose more than half of their value over short periods of time. For example, in 2022, Amazon lost close to 60% of its market value while the market as a whole only declined 25%.
A global fund gives you the growth exposure of the stocks that fly while also giving you the protection of a diversified portfolio.

Ignore The Noise
While the above good news seems common sense, you will seldom read about it in the financial media. Growing wealth slowly over time does not make for exciting headlines. A story about the latest stock to explode makes for a better story, which is why you will always wonder if you are losing out to others.

Key Benefits of Index Funds
There are numerous reasons to own index funds, and the data shows that they tend to outperform actively managed funds over meaningful periods. One key advantage of index funds is that they always include the market’s dominant companies. It’s impossible to predict which sector will dominate the top 10 spots. But the good news is, you don’t need to guess because you’ll own a small slice of it regardless.

Take The Stress Out of Your Investment Decisions
Some stocks die, some stocks fly, and some stocks really soar. Trying to pick these winners in advance is a fool’s errand. By owning a broad global equity fund, you will be a part-owner in the market’s dominant companies, even those no one could predict with foresight. This approach allows us to benefit from the growth of these global giants without the stress and uncertainty of trying to pick individual winners. It also offers the benefits of a diversified portfolio of the Great Companies of the World.

Outlook
If the geopolitical risk does calm with the beginning of real engagement between protagonists, the backdrop is favourable to gains in equities especially to lower priced regions – outside of the US. As rates are cut by Central Banks this should also help equity values. Depending on the scale and pace of cuts it is not unreasonable to expect mid to high single digit gains in bond portfolios by year-end 2024 and repeated more robustly next year. We continue to prefer passive equity exposure but with substantial tilts towards value and markets outside the US which give the benefit of diversification.

I hope you have found this update useful and as always we remain on hand to help with any queries.

Ronan McGrath
Managing Director
Oakwood Financial Advisors

7th July 2024

Address your concerns

The decision to retire brings up many questions, concerns, and indeed many doubts for lots of GP’s. The purpose of this article is to help you identify, consider, and overcome them, either now or at a future date.

Having enough money to retire

Statistics show that concerns about not having enough money in retirement are universal. For many couples who retire in their early to mid-60s (in a developed nation with modern health care facilities) it will be a 30 years plus retirement period.

Critical Issues

When planning for retirement, many GP’s struggle to comprehend the critical issues and how to deal with them. I had two calls recently, from GP clients asking to meet me, with an imminent need to retire. One was 62 year old GP with concerns for his own health. The second case was a 65 year old GP and this related to the health of their spouse. They both needed advice and guidance on how to deal with retiring in a short space of time. Luckily for both, they had been prudently planning retirement for the last several years and had the peace of mind to know financially all was well.

Financial advice and beyond

In my role as a Financial Advisor, I focus on the financial planning aspect, but in so doing, I am very cognisant of the need to be attuned to the emotional side of retirement. This I feel is crucially important. Having enough money to retire is probably everyone’s biggest question and concern. Do they have enough saved to retire is usually the first question our clients ask. It’s a scary scenario for them to ponder. In this article I want to highlight the broader list of issues.

Three scenarios to consider

Author George Kinder is widely recognized as the creator of, what he calls, Life Planning. His philosophy is centred on three questions you should ask yourself before deciding a financial plan.

1. Imagine you’re financially secure and have enough money for both now and into the future. How would this change your life?
2. Imagine your doctor tells you that you have 5-10 years left to live. You won’t feel sick but also don’t know exactly when you will go. How would this change your life?
3. Now imagine your doctor tells you that you have one day left to live. What are your biggest regrets? What do you wish you would have done differently?

Wider considerations

The idea here is that these questions can help you dig a little deeper into your retirement goals and aspirations. It starts out financially but then embraces the more human element. This exercise entices you to go beyond the typical surface-level financial goals everyone talks about and get more specific about your retirement bucket list and aspirations. For most people, these questions are theoretical in nature. But let’s delve into them more fully.

Your busy work life

GP’s have a busy, to hectic, everyday work life.  They don’t tend to have time to focus beyond their short term needs. They are working long days, running a practice, caring for patients, working with and managing staff, before getting home every evening to family life. Hopefully, there’s some downtime to squeeze in some social activities!

Continuity of patient care

Having continuity of care for their patients is very important to many of the GP’s with whom I work. Many GP’s struggle to contemplate stepping away from their practice. In many cases this is due to uncertainty as to who will take over from them and care for their patients.

When planning for retirement, there are essentially several key points to review in advance. These I have set out below.

The Most Important Retirement Decision Factors 

When thinking about what is most important when deciding to retire, the first query is pretty obvious. It’s what probably gives everyone the biggest quandary. Finance!  However, it isn’t the only consideration you should address. While the list below isn’t comprehensive, it will get you started on your retirement planning journey.

Can I fund my retirement? 

Statistics show that concerns about not having enough money in retirement are commonplace. They are mirrored in developed nations across the globe. I repeat, for many couples who retire in their early to mid-60’s it will be a three-decade retirement. The ‘funding question’ is particularly challenging for people when we are ‘in the eye of the storm’. When markets are more volatile than they usually are, your pension/investment values are fluctuating quite a lot. As a consequence, making it more difficult to plan.

Heightened inflation

Secondly, with inflation on a temporarily heightened upwards run – the thought of covering the increasing cost of living throws up a mental block for many people. However, there are other concerns when looking at your retirement preparation. Even if you’ve worked out that you can cope with this inflation, there are other matters that will influence whether you are truly ready for transition to retirement.

1. Are You Emotionally and Mentally Prepared To Retire? 

Asking yourself this question is something you need to tackle well in advance of making your decision. Not everyone takes this question as seriously as they should. Many GP’s work 12 hour days or longer. It is an abrupt change going from working such long hours, seeing familiar faces every day, and having a purpose. Are you ready to let go this routine and familiarity? With this in mind, you may need to do some thinking about what you want your life to be in retirement. Are there any interests you want to spend more time pursuing?  How will retirement affect your family dynamic?

This isn’t just about money!  You will hopefully already include hobbies, travel, education and such into your retirement budget. This question is about ensuring you can wholeheartedly enjoy your retirement and get the most out of your new stage of life.

2. Have You Tracked Spending and Made a Retirement Estimate? 

Retirement often means a change in your income. You will lose or reduce some incomes and hopefully increase or create some new ones (pensions/savings/investment incomes). It also means a change in how you spend your money. It is a good idea to work this new adjustments into your financial plan.

One way to get an informed look at what to expect, is to track your spending for at least a year before retiring. Stay strict with yourself and keep track of everything. The results of this tracking will give you a base to work from when considering the spending adjustments that you will be making on retirement. Remember, try to keep things as reflective of reality as possible, it will pay dividends!

4. Life Satisfaction 

This ties in with point 2. If you jump into retirement too hastily, be it for health reasons or you are burnt-out from your job, you face possible challenges that can affect your mental health and personal life. It is actually one of the most important factors you should think about when looking at what is most imperative when deciding to retire.

Without having thought about what you want your life in retirement to be like, it is very easy to end up feeling a bit lost. Many retirees arrive at a position where they are bored and have lost their sense of purpose. Those that retire without much preparation tend to be the ones that find the transition most challenging.

In addition to exploring some ideas, talking with the family and taking an abrupt step, some people prefer to ease themselves into retirement. Many GPs we advise reduce their sessions gradually, working 4 days a week down to 3 and then to 2. In this way slowly reducing the total hours they work. Others do some consulting to make the transition less abrupt.

5. Is Your Portfolio Ready? – Switching From Accumulating Funds To Withdrawals. 

You’ve been diligently accumulating your pension funds and assets for years but now face the question is your portfolio ready for you to start drawdowns?

This is a pretty intimidating stage for most. Are you happy with the asset allocation and the other parts of your financial plan? Now is a good time to take a look at that planning and make tweaks. Again, it is most prudent to make these tweaks based on long-term perspective as opposed to current factors such as environment/markets/inflation.

6. Know Your Tolerance For Uncertainty. 

Everyone has a different tolerance of uncertainty. This will influence whether they are correctly disposed, and mentally ready, to retire. Uncertainty tolerance isn’t just about your investment portfolio. Fund values will go up and down over time. The key thing to remember here is markets go up on average 75% of the time and down 25%.  There are other uncertainties however to do with the everyday things you will face in retirement.

• Sources of Income
• Purpose
• Filling your time
• Hobbies
• Drawdown of income
• Gifting versus Retaining

How much are you happy to keep in your rainy day bucket for unexpected expenses? Do you want to miss potentially good retirement years before your health declines? No one can predict ill-health but there are things you need to consider and make sure you are comfortable with them.

Think ahead – The Bucket Strategy

When we advise our clients who are contemplating planning for retirement, we outline an image of having their money amounts divided into 3 different buckets:

1. The safety/security bucket – short-term (less than 3 years)
2. The medium term growth bucket (3 to 5+ years)
3. The long term growth bucket (typically 7+ years)

As you can see, there is a lot to consider when thinking about retirement. With increased longevity risk (people living longer) you are more than likely looking at a 30+ years of retirement. The whole point of the growth bucket is to invest wisely funds on a longer timeframe, achieving higher growth for those later years in retirement.

Have a Plan

Choosing to retire is a luxury many people don’t get to have. It can be something pushed upon you by force of circumstance or it is dictated by health matters. Ensuring you get the right financial advice is just one aspect, which will help lead you to having an enjoyable, active retirement for many years. Looking ahead and having a prudent plan (both emotional and financial) will ensure that you make the decision to retire with confidence.

Hopefully, this article has given you a starting point when thinking about ‘what is most important when I’m considering retiring?’

Please click on the article link for more detail.

The purpose of this article is help you look at the key factors when planning your retirement, putting a retirement plan in place, and the main options available to you.

Eliminate the uncertainty

When contemplating, or reaching, a planned retirement, your concerns can be heightened, since you are moving into what we can describe as the Third Stage of your life.  In an ever changing world there is a huge degree of uncertainty. During the last three years in particular we have had a global pandemic and a land war in Europe. Many countries are still dealing with the fallout from the former while the latter shows no sign of abatement. However, historically, there has always been similar turmoil and uncertainty in the investment markets, yet life has gone on in spite of it all.

The Third Act of your life

The first act of life is mostly about youthful enthusiasm and education, the second act is mostly about career and family. In my view, the third act of life should be about your pursuit of your own fulfilment. That is enjoying your hard work and your prudent financial planning. (And in many cases leaving some kind of legacy).

A Financial Plan that is specific to a GP

I have written previously about being prudent and putting the building blocks in place for a sound retirement plan, regardless of global uncertainties. In this article I outline the factors to consider when planning your retirement. In addition, I summarise the main options available to you to provide a sound, and tax efficient income in retirement. Our first step with our clients is to have a Financial Plan. Within it we focus on simple steps towards financial security, maximising tax reliefs and the potential return from your investments.

Key factors you need to consider at retirement

Each individual’s circumstances should be assessed, in the main, under the following headings (but other factors may also need consideration):

1. Age – a GP retiring at age 72 has a reduced life expectancy, and potential income need, than a GP retiring in their early 60’s.
2. Current health – underling health issues are a key factor which need to be considered.
3. Attitude to risk – If going the ARF route, too conservative an investment approach may mean you run the risk of low growth potential over time. The annuity may be the more prudent option in such instances.
4. Taxation/Multiple Pensions – If multiple income sources and pensions – what is the most tax efficient way to structure the drawdown of your income? Which pension / retirement account should you draw on first?
5. Other income sources – Rental income/state pension/HSE pension/part-time work. At what point does the taxation and the Law of Diminishing returns kick in for part time work?
6. Spouse/Dependents – Is your spouse/partner dependent on the income – if so how do you ensure they are protected?
7. Your Will & Legacy – Is your Will up to date, and a Power of Attorney is appointed. Do you want to leave funds to family/children?

GMS Annuity

While the Approved Retirement Fund (ARF) tends to be the preferred option on retirement, the GMS scheme offers attractive annuity rates. This option needs to be carefully considered before making a decision. It is also the intention of the GMS trustees to increase the pension income (Annuity) from the GMS scheme in line with inflation. Two-thirds of the pension passes on death (if applicable) to the spouse.

Approved Retirement Fund (ARF)

An ARF allows retirees to keep control over their pension savings. Their pension fund continues to be invested, preferably in a mixture of assets but predominantly in globally equities for growth. This allows retirees to potentially benefit from investment returns and continue to grow their pension fund while taking regular withdrawals to provide an income during retirement. A key difference between the ARF and an annuity is what happens on death. The ARF option allows retirees to keep control over their pension savings. An ARF can then pass on to the deceased estate – assuming the assets outlive you under a growth orientated investment strategy.

Caveat Emptor

When it comes to retirement advice, many financial advisors have a conflict of interest when advising GP clients. It is important to point out that many advisors are financially incentivized to sell an ARF (they are usually paid a commission), whereas if a GP goes down the annuity route with Mercer there is no remuneration to the advisor. This is where it is very important to make sure that you get impartial advice with a clear understanding of both the benefits or downsides of both the Annuity and ARF option.

Delayed Maturity and Drawdown of GMS

It is also important to note, just because you have retired/resigned from the GMS, doesn’t mean you have to drawdown your GMS pension. Many GPs may have other sources of income and savings. Or, in some cases, continue to help out and cover sessions in the practice from which they have retired. You may not need to drawdown your GMS pension immediately and can delay up to age 72. This allows the funds to remain invested in a tax free growth environment and avoid paying tax on any income drawdown.

Irish State Pension – your potential entitlements

You also need to factor-in your entitlement to the State Pension. From age 66, a GP is entitled to the State pension. The current full contributory State pension (average of 48 or more PRSI stamps) is €13,843 pa plus a spouse benefit (means tested) of €12,365 if eligible (over age 66). We always recommend you review your PRSI record, and for your spouse if applicable, well in advance of retirement. The information can be requested by calling the Dept. of Social Protection at 0818 200 400.

State Pension Eligibility – unexpected obstacles

There have been some very unfortunate cases concerning GPs and their entitlement to the State pension. They apply for their State Pension only to find that they are not eligible. Some GPs were employed by the State to provide services to a district hospital or long-stay care facility. The PRSI contributions for this income, for entrants pre 6 April 1995, is Class D. This class of PRSI is not regarded when determining the State pension entitlement. Impacted GP’s can have a significantly reduced entitlement or in some cases, have lost all entitlement to the State Contributory Pension.

UK State Pension Entitlement

Many Irish doctors have spent time training or working in the UK. For those with a potential UK State Pension entitlement (minimum 3 years National Insurance credits required to qualify) the good news is the deadline for buying additional credits has been extended to April 2025.

Have clear goals

You should use your income as a tool to achieve your life goals. Although I am obviously biased, a trusted financial advisor can help you reach those goals. But only if she/he has the expertise to do what’s required. Then, together, you can define your goals clearly and identify the ways to achieve them. For many investors, emotions tend to override investment decisions. That is why a financial plan (and trusted advisor) is essential to guide you from making poor investment decisions along the way and have a disciplined approach.

Your Retirement Plan – for now, and your future

The essence of retirement planning is estimating your income needs – both now and in the years to come. A prudent financial plan, reviewed annually with your advisor, will allow you to calculate the level of capital required to maintain your desired lifestyle. You then have every chance of putting a realistic plan in place to help you achieve your goals and maximise your Third Act!

Please click on the article link for more detail.

A Bare Trust can be used by a client if they wish to gift money to children under the age of 18, who lack legal capacity to manage such assets.

The trustee(s) manage and control the funds until they are released to the beneficiary(s) at a future date.

Unlike some other trusts, a Bare Trust can’t be revoked. Once monies are paid into the trust, the beneficiary(s) becomes absolutely entitled to the assets. A transfer of money into the trust can’t therefore be reversed.

Why set up a Savings / Investment plan under a bare trust?

By setting up a savings plan under a bare trust, the client (known as the settlor) can gift money to a child under the age of 18 years (known as the beneficiary) each year by making payments into the policy and the beneficiary can avail of the Small Gift Exemption that currently applies.

Under current Revenue rules, if the total value of all gifts made by one person to another in any one year is less than or equal to €3,000, then gift tax would not apply to those gifts.

The settlor can decide who is to benefit from the amounts invested at the time of establishing the trust. It is important to remember that once a Bare Trust is established, the trust can’t be revoked and the beneficiary(s) named at the outset can’t be changed.

Investment Choices

Investing does, of course, carry its own risks. However, a well-structured and well-diversified portfolio, can be tailored to an individual’s requirements. Managed correctly, it can offer growth potential over deposits, protect capital from inflation and the decline in purchasing power over time.

On that basis we would typically recommend a portfolio based around solid global companies with a proven track record of positive returns above any other asset classes. You do have a choice of how and where funds are invested. Diversifying your investment portfolio is one of the best ways to reduce risk, and thus promote growth.

Glossary

Asset: This could be anything you own that could be worth something – for example your house, your car, the cash you have in your bank account.

Settlor: is the person who sets up the trust and supplies the money for the trustees to invest.

Beneficiary: is the person who benefits from the trust. There may be more than one beneficiary.

Trustees: are the administrators of the trust. They manage any assets of the trust for the benefit of another person.

The article delves into the intricacies of the pension implications for hospital doctors and also focuses on the new Public Only Consultant Contract 2023 (POCC23). It explores the current allowable pension limits, the nuances of the new contract, and the potential pitfalls and confusions arising from recent HSE FAQs document as they impact on pension benefits.

The article also provides some practical advice for hospital doctors who are concerned about the pension limits and how to plan for their retirement.

Some of the key points from the article are listed below.

• The current pension savings limit is €2 million (Standard Fund Threshold), unchanged since 2014.
• Exceeding this threshold results in a 40% Chargeable Excess Tax (CET) on the excess value at retirement.
• Consultants may increase their pension limit to €2.3 million under specific conditions through a Personal Fund Threshold (PFT).
• The Sláintecare Contract poses risks for consultants close to or exceeding the pension threshold as it may negatively impact public service pension benefits.
• A full three years of service under the new contract is necessary to fully benefit from the higher salary’s impact on pension benefits.
• The article advises caution for consultants approaching retirement, emphasising the importance of understanding individual circumstances and potential tax liabilities.
• It looks at the optimum retirement point for maximizing pension benefits while minimizing tax liabilities.
• To minimize risk, the article recommends obtaining accurate pension projections and consulting with qualified financial advisors.
• There is an expression of concern regarding incorrect pension benefit projections and the importance of having a clear understanding when planning for retirement.

Please click on the article link for more detail.

We have seen a rise in the number of requests for money market funds as the yields on these types of funds have increased. This yield increase can be largely attributed to the ECB deposit rate going from 0% in July 2022 to 3.5% in early June 2023.

In response to this, we have sourced the JPMorgan Standard Monet Market Variable Net Interest Asset Value Funds through the Davy Select Platform. 

There are 3 fund options Euro, GBP, and USD which can be dealt daily. The yields (one day current yield as of 3rd October 2023) are:

• Euro: 3.82% gross – More info on the fund can be found here.
• GBP: 5.33% gross  – More info on the fund can be found here.
• USD: 5.66% gross – More info on the fund can be found here.

Please note that the funds are only available to Republic of Ireland resident clients.

What is a Money Market Fund:             

J.P. Morgan’s Money Market funds seek to achieve a return in excess of Euro money markets whilst aiming to preserve capital, consistent with prevailing money market rates, and maintain a high degree of liquidity:

• Money market funds invest in short-term debt from governments, banks, and companies with strong balance sheets, high credit ratings along with other
• They offer diversification of investments, liquidity and relative stability of

Product Details

These Funds seek to achieve a return in the Reference Currency in excess of the applicable [Euro/GBP/USD] money markets whilst aiming to preserve capital, consistent with prevailing money market rates, and maintain a high degree of liquidity.

• Daily dealing which allows for no fixed term
• Withdrawals from this product are The product is dealt daily, and as a result there are no penalties incurred for redemptions.
• Minimum opening balance €100,000

Reasons you might consider Money Market Funds:

• Yields on money market funds have increased in line with Euro short-term rates and therefore offer a more attractive rate of return than cash deposits.
• A Money Market Fund can be coupled with an Equity / Multi Asset Portfolio to help diversify or offer growth potential.
• Also available to corporate clients with significant company funds on

Risks of Investing in Money Market Funds:

• Interest rate risk
  • In adverse market conditions, the Fund(s) may invest in zero or negative yielding securities which will have an impact on the return of the
  • The value of Debt Securities may change significantly depending on economic and interest rate conditions as well as the credit worthiness of the issuer.
  • Issuers of Debt Securities may fail to meet payment obligations, or the credit rating of Debt Securities may be downgraded.
•   Credit risk
• •  The credit worthiness of unrated Debt Securities is not measured by reference to an independent credit rating agency.
•   Exchange rate risk (for USD or GBP)
• • If investing in a foreign currency movements in exchange rates can adversely affect the return of your investment.

Taxation Treatment

The taxation treatment which typically applies is known as ‘Exit Tax’ or ‘Gross Roll Up’. Gains under on the JP Morgan Money Market Fund are taxed (at a rate of 41%) when realised or on each 8^th anniversary.

Warnings:

Practical steps for GP’s impacted by the pension limit

This article addresses the challenges faced by General Practitioners (GPs) who have exceeded the current pension limit, leading to significant tax liabilities. It also outlines the practical steps GPs can take to mitigate the impact.

The main points from the article are outlined below. Please click on the article link for more detail.

1. Context and Background:

• • Many GPs have been regularly contributing to their pension allowances, either through private pensions or Additional Voluntary Contribution (AVC) payments, and their GMS Pension payments. The increasing number of GMS allowances that are now pensionable has significantly bolstered the funds in their GMS pension.
  • Many GPs are now working past the age of 65, with the maximum retirement age set at 72 on the GMS. Consequently, these factors have caused a surge of GPs to surpass the existing pension limit, facing tax liabilities as a result.

2. Challenges:

1. • Unlike hospital consultants, GPs cannot request an enhanced pension limit or spread their tax liability over a 20-year span. If they surpass the €2 million Standard Fund Threshold limit, they must pay the Chargeable Excess Tax (CET) at retirement.
   • A CET of 40% is applied to pension assets exceeding the €2 million threshold. When drawn as income, these assets can be subjected to further taxation, leading to a combined effective rate of up to 71%.

3. Potential Solutions:

1. • Offsetting CET: GPs can use the tax on their lump sum (from the allowable 25% lump sum route) against the CET. This approach effectively lets one fund up to €2,150,000 without paying CET.
   • AVC Funding: If the pension limit is likely to be exceeded, stopping further AVC payments is recommended.
   • Investment Strategy Review: If pension assets surpass the SFT, it’s crucial to balance risk vs reward since high taxation rates apply to any growth, while market downturns could lead to potential losses.
   • Tax Bill Reduction Strategies:
     • Utilize the tax-free lump sum of up to €200,000.
     • Retire benefits in phases, drawing from the private pension initially.
     • Split private pension pots for a phased drawdown.
     • Consider early retirement to stay below the €2 million threshold.

4. Minimizing Risks:

1. • Review current funding and project pension values.
   • Assemble this information, ideally with the assistance of a trusted financial advisor familiar with the GMS scheme.
   • A suitable financial plan is paramount.

5. Delaying Pension Benefits Drawdown:

1. • It’s possible to delay drawing down pension benefits until age 75 (Max age on GMS scheme is 72). However, if benefits remain unmatured at that age, CET is automatically applied. Exceptions can include cases of severe ill health, where benefits on death aren’t subject to CET.

6. The Importance of Expert Advice:

1. • Every individual’s retirement situation will vary. While free advice might seem enticing, it’s not always accurate or beneficial. A handful of financial advisors possess the technical know-how to guide on GMS pension benefits. Thus, getting expert advice is essential.

Summary: The landscape of pensions for GPs has grown increasingly complex, especially with many approaching or exceeding the pension limit. This situation brings about substantial tax implications, necessitating careful planning and expert guidance. While there are various strategies to navigate these challenges, from offsetting CET to delaying pension drawdowns, the underpinning message is the importance of informed, expert advice in making these crucial financial decisions.

A Pension Retirement Bond, also known as a “Buy Out Bond” or “Retirement Bond,” is specifically designed for individuals who are leaving employment or transitioning to a new job. This type of bond provides the benefit of transferring a pension fund from an employer scheme into a policy in your own name, giving you control over your retirement savings.

It’s important to remember that when leaving a Company Pension Scheme, you typically need to choose from the following options:

1. Leave your pension fund where it is (within your former employer’s scheme) and draw on benefits when you reach retirement age – typically age 65.
2. Transfer your fund into a new employer’s fund subject to new employer’s
3. Retire your benefits (if over age 50).
4. Transfer your fund into a Buy Out Bond / Personal Retirement.

For further information please contact us and we can discuss your individual requirements.

If you are aged between 45 and 70, you may be eligible to buy extra National Insurance (NI) years to boost your state pension. If you are eligible, the returns can be significant.

This is thanks to ‘transitional arrangements’ brought in when the new state pension system started in 2016. However, the clock is ticking on how long you have left to do this. Read our step-by-step guide to find out if you qualify and if it is worth it for you.

Why national insurance years are important

A new state pension system was brought in on 6 April 2016. The maximum amount is currently
£185.15 a week, but how much you’ll get depends on how many ‘qualifying’ national insurance (NI) years you have.

Many will likely need about 35 qualifying NI years, though for those who started their NI record before 2016 – almost everyone aged 45 to 70 now. However, for those between age 45 and 70, it is based on your age and NI record up to now – which could mean you need more than 40 NI years.
In order to plug any gaps, there are ‘transitional arrangements’ in place. These mean you can pay to plug gaps in your NI record back to 2006. This arrangement ends on 5 April 2023, after which you can only fill gaps going back six tax years.

Step 1: Check how much of the full state pension you’re on target to get

• If you’re not yet at state pension age you will need to check your entitlement on:

https://www.gov.uk/check-state-pension

If you’re not predicted to get the full amount of £185.15 a week, you need to check for gaps in your NI record. There will be a link in your forecast to do so

• If you’re already at state pension age, you need to check your National Insurance record on :

https://www.gov.uk/check-national-insurance-record

That will show you any national insurance years since 2006 that are ‘incomplete’. If you have gaps that you’re unlikely to fill by any other means, it could be worth paying to plug these to get a higher state pension.

Step 2: Work out if you should pay to boost your state pension

Until 5 April 2023, you can buy national insurance (NI) years to fill gaps going back to 2006. When these transitional arrangements end, the number of extra years you can purchase drops down to the last six tax years, so checking now is key.

• Those at or near state pension age will find it relatively easy to see if topping up may If your state pension is, or is forecast to be, less than £185.15 a week, and you won’t be able to plug gaps by any other means, topping up could be a no-brainer.
• If you’re younger, it’s more of a toss-up as you may still fill the gaps by other means. The checks above show how many years you already have, and how many are left. If a shortfall is likely and you’ve NI gaps for 2006 to 2016, you need to decide by the deadline of 5 April 2023 whether to top up.

Though the younger you are, the more time you have to earn the max years through work or NI credits. That’s why this guide is roughly for over-45s, or maybe over-50s, as under that there are so many years left until state pension age, it would be taking a real risk to buy now unless you’re sure you won’t make them up later (for example, as you live overseas).

Important:

If you were ‘contracted out’ of the additional state pension before 2016, topping up may not help. Much here depends on your NI record from that period and it’s difficult to generalise and say who should and shouldn’t top up. As it’s so complex, it’s doubly important to call the Department for Work and Pensions helplines in step 5 to understand if paying to plug any NI record gaps will actually result in you being paid more state pension.

You’re more likely to have been contracted out if you worked in the public sector. You can check by looking at a pre-2016 payslip or P60 – if the NI contributions line has D, E, L, N or O next to it, you were contracted out.

Step 3: See what topping up could be worth

There are several points to consider:

1. Buying a full national insurance (NI) year costs £824, unless:
   • You’re topping up the two most recent tax years, in which case it’s about £20 to £30 cheaper
   • You’re self-employed, or
   • You’re topping up partial years, in which case it’ll cost less to upgrade it to a full year

2. How long are you likely to live?

The potential gains to be made from buying voluntary NI contributions are huge. But one of the factors it depends on is if you’ll live long enough to gain. Consider your health to see if you’re likely to benefit.

3. To ensure you’re not wasting money – For most people, the breakeven point will likely be six years due to higher tax rates (it is important to note the cost of buying back years is paid from personal funds however the state pension will be taxed.

Step 4: Don’t pay until you’ve called the Government’s pension helplines

There are many complexities, so the only way to know for sure if this is likely to benefit you is to get personalised information from the Future Pension Centre or the Pension Service.

Both services provide specific information about your current national insurance record. They’ll tell you whether doing so will actually result in any increase to your (eventual) state pension. It is possible to pay to plug a gap and see no gain, which is why this step is so important.

If you’re not yet at state pension age, you will need to contact the Future Pension Centre on +44 (0)191 218 360.

If you’re not predicted to get the full amount of £185.15 a week, you need to check for gaps in your NI record. There will be a link in your forecast to do so.

If you’re already at state pension age or if you’ve deferred your state pension or you need to contact the Pension Service. You can find the details for contacting them on https://www.gov.uk/contact- pension-service

Step 5: A few buts… not everyone will be better off if they buy more NI years

The Future Pension Centre or the Pension Service can tell you if paying for extra national insurance (NI) years will increase your state pension entitlement. But you need to think about the bigger picture, as a larger state pension may have a detrimental effect on other parts of your financial life, and the Government’s pension services can’t help you with that. Think about:

• If you’re likely to have a low income and will only rely on state pension, pension credit may cover the gap. Pension credit is a top-up for people of state pension age who don’t have a certain basic level of income. That can include topping you up to roughly the equivalent of what you get in the full state pension. So if you have no other savings or assets and are likely to be only relying on your state pension or a little more, there is a risk that by paying to top up now, you could have got the same with pension credit.
• It should be noted though, especially if you’re trying to future-proof the years ahead, there’s no guarantee that pension credit will still exist, be at the same level or have the same eligibility criteria. So if you’ll benefit from topping up now by paying for NI years (and can afford to), that is a more certain outcome.
• The gains from buying extra years may be reduced if it pushes you into a higher tax If you were to be near the threshold of either paying tax or hitting the 40% tax bracket once your state pension and other income is combined, you will pay (more) tax on your pension income if that income increases.

This will mean it takes longer for you to break-even on any voluntary NI contributions you make – though it’s likely to still be worth doing, even with this.

How to buy missing NI years

If the Future Pension Centre or the Pension Service has said buying additional national insurance (NI) years would result in extra income and you’ve made the decision to top up, you now need to decide how many NI years to buy.

Do note you don’t need to buy all the NI years you want in one go – you could buy some now and some later in the year if that suits your cash flow better.

• To find out how much topping up would cost and to get your 18-digit reference number, you’ll need to contact HM Revenue & Customs (HMRC) on + 44 191 203 7010
• The reference number will ensure the payment’s added to the correct NI record. HMRC can give it to you over the phone (by post it takes about 15 working days). Once you have it, you can pay through your bank or building society, online or in branch, to the HMRC bank You can also pay by cheque, though HMRC says this takes longer to process.
• If you’re not yet claiming state pension, the payment can take up to 60 working days to process, after which you should see your NI record change to acknowledge the voluntary contributions you’ve made.
• If you’re already claiming state pension, HMRC will notify the Department for Work and Pensions (DWP) that you’ve done so, and prompt DWP to carry out a benefit review, so your payments won’t increase straightaway. However, the DWP will backdate the increase to the date you made the payment (NOT to the date you started claiming state pension).

Pension limits have become a major concern for hospital doctors, primarily due to recent changes in salary and tax implications. The final FEMPI salary cut reversal, resulting from a 2018 High Court win, has had unintended consequences. It has inadvertently caused higher tax liabilities for doctors upon drawing down their pensions due to the 2014 reduction in pension limits.

The attached article from the Irish Medical Times Pension-Limits-A-major-concern-for-Hospital-Doctors was published in 2021. The article highlights the concerns of HSE hospital consultants regarding pension limits and their entitlements. It also provides information on recent developments and options available to mitigate tax liability.

Here are some key points from the article:

• The 2018 High Court win resulted in the reinstatement of pre-2010 and 2013 salary cuts for Health Service Executive (HSE) hospital doctors. However, the knock-on effect of this was the potential for a significant tax bill at retirement due to the 2014 reduction in pension limits.

• An Ombudsman ruling against a large Dublin city hospital is a significant win for those with a tax liability. The hospital tried to force the consultant to repay the tax on her pension benefits over a 10-year period. The Ombudsman upheld the complaint against the hospital and, in a legally binding ruling, determined that the consultant can write-off her tax liability over a 20-year period.

• Revenue has advised that those individuals who have been issued with a Personal Fund Threshold (PFT) Certificate in January 2014 may be eligible to reapply for a revised PFT at a higher limit.

• Avoiding Double Taxation: Proper advice and retirement planning are crucial for doctors to prevent double taxation.

Conclusion:
Hospital doctors face complex pension challenges due to recent legal and regulatory changes. While potential tax liabilities have risen, multiple strategies can help mitigate these burdens. Expert advice tailored to HSE pension intricacies is paramount for doctors to navigate their retirement planning effectively.