New Ireland Assurance Provider of choice in the Life and Pensions Market NUI GALWAY PENSION & RETIREMENT PLANNING PRESENTATION- AVCs 9.30 11.30 14.15 Presenters: Noel Hackett - QFA Senior Pension Consultant Dearbhla Cullen- New Ireland Assurance Galway State Street Global Advisors Senior Relationship Manager | SSgA | Wednesday, 24th June 2015 Who Should I Contact: Pensions Office NUI Galway Ph: (091) 495028 ext: 5028 Email: [email protected] OR Noel Hackett, QFA, Pensions Consultant New Ireland Assurance, Atlanta House, 36 Dominick Street, Galway
Tel: (091) 563023 Mobile: 086- 8186163 Email: [email protected] About New Ireland Assurance New Ireland is a leading Life Assurance Company in Ireland Provides life assurance, pensions & investment solutions to over 500,000 customers Established almost 100 years ago, New Ireland was the first wholly Irish owned company to transact business in Ireland New Ireland remains Irish owned to this day as part of the Bank of Ireland Group 3 4 The Company has gone from strength to strength, from just 1,000 in assets in 1918 to over 13.4 billion today (Feb 2014)
New Ireland employs over 1,100 people with the main Head Office on Dawson Street for over 85 years Have world class investment partners for our existing single manager portfolios including State Street Global Advisors Ireland, Bank of New York Mellon Asset Management and Kleinwort Benson Investors Agenda 1. Your Main NUI Galway Pension Schemes 2. Sample Pension Benefit Statement- Scope for Notional Years and AVCs 3 ESMA Risk Rating Scale 1-7 4.The Finance Act 2015 and changes that may affect you 5Investment Market Update and Investment Outlook for 2015Dearbhla Cullen SSgA 6Fund Choice, Fund Manager, Fund Performance and Fund availability under your AVC Scheme
5 Benefits at Retirement At retirement your benefits will come from: State Pension ( PRSI Contributions) NUIG Scheme (s) Purchase of Notional Years Additional Voluntary Contributions ( AVCs ) Personal Accumulated wealth/savings inheritances 6 NUIG Pension Scheme Defined Benefit Scheme Scheme provides Pension Lump Sum ( Gratuity ) Spouses Pension Increases during course of payment Death in Service Benefit Actual benefits depend on when you joined Please refer to your NUIG Annual Benefit Statement. ( Individual Consultations with Noel Hackett) 7
Key Dates Pre 95 no state pension, higher pension through NUIG Post 95 - employees pay PRSI and receive: State Pension Lower pension from NUIG 2004 Future employees have minimum RA of 65 Immediate early retirement pension available to: Existing employees from 50 New employees from 55 2013- Career Average Earnings 8 State Pension From 2014 Single Person: Married Couple: 230.30 per week
383.80 Applies to all employees who joined since 1995 State Pension 2014 2021 2028 from age 66 from age 67 from age 68 (Social Welfare will pay Job Assist or other S/W payment- where for whatever reason S/W payment not allowed, a Supplementary Pension maybe paid by NUIG ) 9 Early Retirement Was always allowed but only as a deferred pension Changes from 2004 Existing employees from 50 New entrants from 55 Immediate pension payable
Early payment reduction 10 Bridging the Gap - 2 Options Purchase of Notional Years of Service Through NUI Galway Pensions Office AVC Scheme Through New Ireland Assurance 11 Notional Years Employee can buy notional years Defined Benefit basis Must buy year with all the trimmings Pension Gratuity Spouses Pension Pension Increases 12 AVC Scheme
13 Tax Relief Tax free growth Fund Choice Flexibility Options at retirement Inheritance Tax Planning Fund for tax free lump sum, taxable lump sum Employee Tax Relief Limits (including AVCs) Age Up to 30 30 - 39 40 - 49 50 - 54 55 - 59 60 +
% of Remuneration 15% 20% 25% 30% 35% 40% - An earnings cap of 115,000 (2015 apply to Employee Pension Contributions for the purpose of tax relief - The above limits include contributions to NUIG Pension Scheme 14 Tax Relief- The Importance!!! Monthly Contribution Tax Relief Net Cost 100.00
Standard rate 20.00 80.00 Marginal Rate 40.00 60.00 Saving in Bank/Credit Union Earn gross either 120 or 135.00 before PAYE/PRSI/USC/PRD 100.00 net invested in Bank/Credit Union Then its subject to DIRT Tax currently 41% and PRSI 4% OR Save 100.00 in Pension ( AVC or Purchase Yrs) that costs you 60.00 or 80.00 or Save 100.00 that costs you 120.00 or 135.00 15 Contributions and tax relief operated at source Importance of Taxation PRE/POST
Retirement Total gross contribution of 100.00 Less tax relief NET cost of contribution @20% 100 -20.00 80.00 @40% 100 -40.00 60.00 Post Retirement Assume 100.00 is still 100- no growth Tax Free lump sum 100.00 get you 100.00 Nil tax ( PRSI age exemtion limit ) 100.00 get you 95.00 Standard rate of tax 100.00 get you 74.00 Marginal rate of tax 100.00 get you 54.00
Estimates only. 16 SAMPLE PENSION STATEMENT and Scope for AVC and Notional Years Purchase 1.NAME Noelle Hackett 2. Employee no0123457e
3. Gender female 4. Civil Status single 5.Date of birth 20.09.1957 6. Starting pension 24-Jul-01 7.Starting date (JPS) 01-Nov-02 8.Date of Retirement 20-Sept-22 9.Age at retirement 65 10. Pension code 14 11. Location in College Secretary for XXX 12. PPS no 1234567A 13. Salary (current) 56,602 12D Pt 5 14. Pension Fraction 60ths 15. Pension Fraction (alternative) 80tths Social Welfare (A) 11,971 (B) 23,951 (C) 17,963 (D) 39,919
17 SAMPLE PENSION STATEMENT and Scope for AVC and Notional Years Purchase- Contd Service Years 19.902 0 16.Actual Service Purchased Transferred Unpaid leave
Total (MAX 40) 19.8997 17. Pension based on sixieths (1/60) Years*Salary (less C acove *1/60 Less clawback 1/9*lump sum c/b 18 Claw back 0 0
-0.0027 12,815 43 12,772 18. Pension based on eightieths 1/80 ( alternative to 17) Service X (3.33OAP or Sal if less3.33 OAP)200 3,972 per annum Service X (Salary-3.33 OAP)80 4,150 per annum 8,122 per annum Plus Lump Sum Years *Salary*3/80= 42,239 First 200K Tax Free Less Clawback years % of Salary 388 Net of Clawback 41,851 Continued. 19. Death Benefits in retirement Spouse or civil Partners and Childrens Pension in retirement Spouse or Civil Partners Pension of pension based on (1/80) 5,550
per annum Childrens Pension 1,850 per annum ( Social welfare payable to spouse on death under S/W rules) SERVICE BREAKDOWN THEN LISTED. 19 OPTIONS FOR NOELLE HACKETT 1. Can Purchase Notional Years Service to go from 19.902yrs to 40 Yrs Max- purchase an additional 20.1 yrs 2. Fund AVC for (a) Bridge GAP Tax free Lump sum Revenue permits
120/80ths for greater than 20yrs service, 19 yrs =114/80ths of Final Salary [114/80 of 56,602 = 80,657 NUI Galway provide 3/80ths for every actual Year (59.67/80ths )42,239 Shortfall between Revenue and NUI Galway =38,418 FUND AVC FOR 38,418 tax free in addition to NUI 2(b) Fund AVC to take upto 80,657 TAX FREE from AVC opt not to take Tax free Lump sum from NUIG in Section 17 , and take higher pension 12,815 per annum . Permitted once your Pension is less than 50% of your salary after Tax free Lump sum This case 12,815 is only 22.6% and not 50% of 56,602 20 Options Continued Decision to Take Tax free Lump sum or Higher Pension. This Case Pension of 12,772 per annum
Or Pension of 8,122 per annum + 42,239 Lump By taking lump from Pension You are losing 4,650 per annum Guaranteed for LIFE Divide Lump sum by 4650 and that equals 9.08 YRS So if you were to live for at least 9 yrs post retirement or longer then You need to consider the VALUE, the correct choices to be considered. 21 ESMA RISK RATING What is yours?
22 European Securities Market Authority (ESMA) Jan 2014 Guidelines on all investment funds throughout Europe assessed for risk rating 1-very low 2 -Low risk 3- low to medium 4- medium risk 5- medium to high 6- high risk 7- very high risk Questionnaire 15 questions using EValue to ascertain your Risk profile Email [email protected] and ask for Questionnaire, and your free Report. Risk for both regular investing and lump sum investments. 2015 Finance Act- Main changes 23 Pension Levy 0.15% in 2015- Abolished in 2016
Standard Fund Personal Threshold to 2m Defined Benefit Changes DIRT Tax 41% plus 4% PRSI Inheritance Tax Threshold Gift Tax Age Exemption Limit @ Retirement AVC Account- Pensions on line Facility www.newireland.ie Pension Schemes On Line (PSOL ) To track your own pension account Secure access to your account Values updated daily New Ireland Investment Centre http://fundcentre.newireland.ie Up to date price\performance information Monthly factsheets include asset split, fund size etc Graph performance of funds 24
Would you tell me, please, which way I ought to go from here? That depends a good deal on where you want to get to, said the cat - Lewis Carroll, Alice in Wonderland 25 Lets begin by reminding ourselves of the cornerstone questions of any investment decision.. Objectives: What do Timeframe: Risk Profile: you want to achieve? How long do you have to achieve it? How much risk can/will you take to achieve it?
Every aspect of investment advice should revolve around always being aware of your views on each of the three key points above! 26 The events of 2008 still fresh in our memories! Sept. 8th Sept. 14th Sept 15th
Sept 16th Sept 18th Fannie Mae & Freddie Mac under government control. Lehman's files for bankruptcy Bank of America purchases Merrill Lynch Fed takes 80% stake in AIG for $85bn Lloyds TSB takes over of HBOS Central Banks globally pump $180bn of liquidity into the market Market ban on short selling Sept 19th Paulson announces Troubled Asset Relief Program markets soar Sept 21st Goldman's Sachs & Morgan Stanley become Bank holding companies Sept 26th Overnight collapse of Washington Mutual in the biggest US bank failure ever. Sept 29th Announcement that Bradford & Bingley and Fortis are being nationalised. Citigroup agrees to buy Wachovia's banking business. Sept 30th News that Irish government will guarantee all deposits and debt of main credit institutions for 2 years US Lawmakers vote against proposed treasury rescue package d n A 27
e h t ! ! r e b o t c O e m a c n 1st week in October 08: As bad a week in markets as wed seen in decades! 28 This left many Investors very nervous about their future
finances, long after the market began to recover! Is it safe to Come back out? Both optimists and pessimists contribute to society, the optimist invents the airplane, the pessimist the parachute.George Bernard Shaw 29 1926 to 2014 annualised returns of the Standard and Poors equity index. S&P 500 Index - Total Returns Year 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 Year
Cash funds offer little in terms of return.. 2011 > 5% 31 2012 > 4% 2013 .5% 2014 .25% Inflation may well be an issue in the near future. Challenge! 32 But we still only have a finite number of assets in which to invest! Equities Equities
Property Deposits Property Bonds 33 Alternatives Avoiding significant losses should be the starting point for every successful investor! Loss Required Gain -20% +??% -40% +??%
-60% +???% -90% +???% Minimising losses and reducing investment risk has become more and more important to investors after the great financial crisis of 2008. 34 Avoiding significant losses should be the starting point for every successful investor! Loss Required Gain -20% +25%
-40% +66% -60% +150% -90% +900% Minimising losses and reducing investment risk has become more and more important to investors after the great financial crisis of 2008. 35 The key learning from recent pastthe power of stable returns. A +29.6% +20% +20%
-10% B +35% -10% +5% C +33.1% +10% +10% +10% +27.6% I have two basic rules to investment, Rule no1: Never lose money. Rule no 2: Never forget rule no 1!! Warren Buffett Source:
Source: Newton Newton 36 A complex marketwhich can be difficult to navigate Derivatives for Protection Tactical Asset Allocation Customer Questionnaires Property? ESMA? Protected Funds Manager Diversification Rebalancing
? 37 Portfolio Construction Total Return Strategies Market Neutral Strategies Regulation & Compliance Investment Standard Suite Choice of 12 funds Independent fund managers Different risk levels 38 SSgA A True Global Player 2.0 Trillion in Asset Under Management1 Over 400 investment professionals
27 Global Offices; 9 Investment Centres 24 Hour Trading Rankings: # 1 Global Endowment/Foundation Assets2 # 1 Sovereign Wealth Fund Assets2 # 2 Worldwide Institutional Assets2 Key Stats: We Manage Money for 9 of the Top 10 S&P 500 Companies3 We Manage Money for 6 of the Top 20 Wealthiest Countries in the World 3 AUM is $2.15 Trillion. This AUM includes the assets of the SPDR Gold Trust (approx. $37.1 as of 30 September 2013). for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent. Please note that AUM totals are unaudited. 2 Pensions & Investments, 31 December 2012. 3 Source: SSgA, as of 31 December 2013. S&P 500 top 10 by market capitalization as of 31 December 2013. Source: SSgA. Top 20 Wealthiest countries by GDP per Capita as of World Economic Outlook Database October 2013. 1 39 IREPRS-0681 SSgA: Size isnt Everything. But it Helps! Snap shot of how SSgA measure up against some local competitors 1800
1600 1400 1200 800 1,600 1000 600 Aviva 0 SSgA Source: P&I/Towers Watson Global 500 year end 2012. 40 IREPRS-0516 Zurich
Global AUM ( Billion) 205 Great West & Irish Life 250 335 200 340 400 Standard Life Passive IRIS Performance (as at 14.04.2015) Source: New Ireland Fund Centre as at 14 April 2015. Past performance is not a guarantee of future results. Performance returns for periods of less than one year are not annualized. The performance figures contained herein are provided on a gross of fees basis and do not reflect the deduction of advisory or other fees which could reduce the return. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in in Euro.
Source: New Ireland Fund Centre 41 IREPRS-0960 41 Passive IRIS Glide - Path Default Fund 42 Active IRIS Performance (as at 14.04.2015) Source: New Ireland Fund Centre as at 14 April 2015. Past performance is not a guarantee of future results. Performance returns for periods of less than one year are not annualized. The performance figures contained herein are provided on a gross of fees basis and do not reflect the deduction of advisory or other fees which could reduce the return. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in in Euro. 43 43
Active IRIS Glide Path 44 A Different Approach Lifestyling Moving to safer assets as you get older Passive approach Active IRIS approach Equities 45 IREPRS-0740 Source: SSgA. This chart is for illustrative purposes only. Absolute Return Bonds / Cash
Target Return to Help Absorb Shocks Equities Early Years Goal Equities + Absolute Return Fund 46 Source: SSgA. This chart is for illustrative purposes only. Growth phase Retirement Target Return Strategy 47 Target Return Strategy Helps Manage Risk
48 Target Return Strategy Helps Manage Risk 49 Passive Management Why SSgA for Passive? SSgAs Trading Advantage Helps Deliver World Class Index Tracking 24hr Trading London, Boston & Hong Kong 282 million shares traded every day 21.8%2 of shares matched between clients 0.02%3 trading commission paid on market trades = Low Cost and Efficient Trading 1 2 3 SSgA Global Trading Desk for year ending 2012. Boston Global Passive Equity Desk average, Q2 2013. Average Commissions paid on traded, Boston Global Passive Equity Desk, Q1 2013.
50 IREPRS-0740 Source: SSgA, All World Developed Equity Index, MSCI World Net Dividends Re-invested. Past performance is not a guarantee of future results. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in euro. The performance figures contained herein are provided on a gross of fees basis only, but net of administrative costs. The performance figures do not reflect the deduction of investment management or other fees which could reduce the return. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. Passive IRIS Global Equity (MSCI) Country Allocation Top 10 Stocks 51 51 Source: Country Allocations and top 10 Holdings: ssga.com as at 31.03.2014 % of Fund APPLE INC 1.5% EXXON MOBIL CORP
1.3% MICROSOFT CORP 1.0% GOOGLE INC-CL A 1.0% JOHNSON & JOHNSON 0.9% GENERAL ELECTRIC CO 0.8% WELLS FARGO & CO 0.8% NESTLE SA-REG
0.8% CHEVRON CORP 0.7% JPMORGAN CHASE & CO 0.7% Passive IRIS Government Bonds Country Allocation Key Stats Approx. Duration Approx. Yield to maturity 52 52 Source: Country Allocations Are the neutral benchmark weights for both funds. The Key Stats are provided by SSgA as at 31.03.2014 and are based on the underlying SSgA funds. Government Bonds
Long Government Bonds 6.9 12.4 1.2% 1.9% Passive IRIS Corporate Bonds Key Stats Benchmark Euro Corporate Bond Index Fund. Barclays Euro-Aggregate Corporate Bond Index Effective Duration
4.7 Yield to maturity 1.8% Number of Issues 1,372 53 Source: Country Allocations and Key Stats are taken from SSgA.com as at 31.03.2014 and are based on the underlying SSgA fund SSgA 53 Corporate Bond Fund Performance Figures & Fund Choice 54 FUND
Funds are updated each day. ESMA Risk rating 1 to 7 scale 18.06.2015. 1-GILT FUND 1 month -2.7% 3 month -8.2% yr to date -2.3% 2- Changes to Consensus Fund by SSgA past 12months 0.1% 9.0% 5.0% 0.1% 3.4% 14.6% 19.4% 14.7% 16.1% 18.3% 7.7% 3yrs pa 0.1%
Key Stats (Excluding Cash Holding) Fund Size # of direct holdings 90% Approx. Initial Yield** (on direct property assets held) 6.6% Weighted Average Term to Break* Currency Hedging (level of currency hedging on Non-Euro investments) 55 47 % of fund in Direct Holdings Vacancy Rate (ERV of vacant assets expressed as % of total
ERV of direct assets) 55 495M Source: SSgA. All data is at 31 March 2014 unless otherwise stated subject to change, and should not be relied upon as current thereafter. The weights above are exclusive of cash holdings. *As at 30 June 2013. **This is calculated on the basis of contracted rent divided by capital value of direct property holdings and does not take into account any of the costs associated with the fund or property acquisition costs. 11.2% 6 Years 50% 100% Passive IRIS Cash - Primarily invested in AAA Rated SSgA Liquidity Fund - Over 75 different Cash Instruments held with over 40 different large
Financial Institutions - Weighted Average Maturity of Cash Instruments is 38 Days - Primary Focus is on Safety and Liquidity 56 56 Source: Stats taken from SSgA.com as at 31.03.2014 SSgA EUR Liquidity Fund So lets finish by looking at the correct investment process. 1. Your Goals objectives 5. Regular Review 4. Investment Fund choice
57 2. Your Risk Profile 3. Asset Allocation What Should I Do Next? Contact: Pensions Office NUI Galway Ph: Email: (091) 495028 ext: 5028 [email protected] or Noel Hackett, QFA, Pensions Consultant New Ireland Assurance, Atlanta House, 36 Dominick Street, Galway Tel: (091) 563023 Mobile: 086- 8186163 Email: [email protected]
58 Any Questions? Thank You for attending 59 Individual Consultations Available Noel Hackett will be available (9 5pm) for Confidential Individual Consultations Concourse Room AC 203 (near Smokeys/BOI ) Thurs 25th June 2015 & Friday 26th June 2015 Contact: Karen Costello/ Jacqueline Joyce Extn 5901/5028 [email protected][email protected] 60
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