# Can I start a pension for my mother?



## Praetor (22 Jun 2011)

Hi, I'm 25 and doing pretty well for myself. My mother (mid 50's) is separated from my Father, owns her own home, has a decent job  and is not in any financial trouble or anything, but I still worry about her future as she has no pension and who knows what will happen with the state pension, etc..

 I was wondering if it would be possible for me to start a pension for her, and pay into it regularly over the next ten years until she retires?  I dont know a ton about this issue, so it may not even be possible. If it is possible, what would be the best product for me to choose? What would the tax implications be for us both ? Note, my income is not taxable (gambling), for whatever relevance that has 

If anybody has any alternative ideas as a means of securing her financial future, I'd be very interested also  Thanks


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## Brendan Burgess (22 Jun 2011)

If you mother is paying tax on her income at the top level, she might consider paying into a pension. However, as this is the last year where it's worth doing so, there probably is no real point in her starting a pension.

So the question is how do you help your mother provide for her old age? A pension is not the right framework, but you could simply give her money to save for herself. At the moment, you can give her up to €330k in total without her paying Capital Acquisitions Tax. So I would recommend that you give her this amount immediately. 

However, you have to decide if this would reduce your own earnings as it might reduce your bankroll.

Many gamblers go bust from time to time, so it's probably a good idea to get rid of your money from time to time to someone who won't gamble it. But you have to make sure that she does not give it back to you if do go bust, so that you slowly build up your bankroll again. 

Brendan


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## Praetor (22 Jun 2011)

I'm not really looking for advice on bankroll management/anything related to my own income or risk, but thanks  

Why is a pension not the right framework? 

Incidentally, my understanding of CAT from College was that Child==>Parent was only threshold 2 (40k) unless the child dies?


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## Gekko (22 Jun 2011)

Praetor said:


> Hi, I'm 25 and doing pretty well for myself.
> 
> Note, my income is not taxable (gambling


 


Praetor said:


> I'm not really looking for advice on bankroll management/anything related to my own income or risk


 
Apologies Praetor, but I'm highly sceptical about claims like yours...I've yet to meet a "professional gambler" who hasn't a touch of Walter Mitty syndrome when it comes to their success. From the information you've provided us with to date, your mother's probably in a better place financially than you are. I don't mean to offend you, but given your age I'd be extremely concerned about your "career" and long term earning prospects.

Notwithstanding my own personal views, you could currently make a once off gift of €33,208 to your mother and gift her €3,000 every year and no gift tax would arise. Your mother could then drip feed this money into (say) a PRSA in the most tax efficient way possible.


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## Praetor (22 Jun 2011)

Your skepticism is fine, you dont really need to believe or misbelieve me, I'm simply looking for advice in terms of providing security for my Mother.


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## Woodie (22 Jun 2011)

Praetor said:


> Why is a pension not the right framework?


 
Besides the side issue of where the money is coming from, the query is laudable in wanting to help a relative. 

I'm also interested becasue I have a similar position with a sister and would like to know why the pension is not the right framework? And if not what vehicle could someone put money into to retirement as the OP mentioned. 

I understand that nothing is certain at the moment and that big tax breaks are on the way out but what are the options now for someone for who life has thrown a few curveballs?


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## LDFerguson (22 Jun 2011)

I think the most tax efficient way of doing this is to gift the money to your mother as per Gekko's post above and then _she_ makes the pension contributions, on which _she_ can claim tax relief.  

Her tax position (now and future), financial circumstances and employment will all have a bearing on what type of pension product is most suitable for her.  For example, is there any pension scheme in her place of employment at present?


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## ondeball (23 Jun 2011)

Would you not be as well to start a savings account. Ulster Bank have a decent savings rate and there's a couple of UK -based bank (Nationwide) that would offer a better yield than a pension anyhow. 

I doubt you'd get any tax rebate for it either so hardly worth setting up a pension fund.


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## Brendan Burgess (23 Jun 2011)

Just to be clear.

You should not be making any pension contributions for yourself or anyone else, as you get no tax relief on them. When you draw down a pension, it is taxable. So it makes no sense to put net income into a fund which will be taxed when it comes out.



> Incidentally, my understanding of CAT from College was that Child==>Parent was only threshold 2 (40k) unless the child dies?



My mistake. You are quite right. Child to Parent is Threshold 2 and the rate for 2011 is €33,208 which is expected to go down in the next budget.

A person should only make a contribution if they are getting tax relief at the top rate, as it will probably be taxed at the top rate when they retire. 2011 may be the last year in which this relief is available.


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## Brendan Burgess (23 Jun 2011)

Gekko said:


> Apologies Praetor, but I'm highly sceptical about claims like yours...I've yet to meet a "professional gambler" who hasn't a touch of Walter Mitty syndrome when it comes to their success. From the information you've provided us with to date, your mother's probably in a better place financially than you are. I don't mean to offend you, but given your age I'd be extremely concerned about your "career" and long term earning prospects.



Hi Gekko

There has been an explosion in poker in the last few years. The vast majority are losing a lot of money. But a very small few are making a living at it. I know a few who are not remotely Walter Mittyish. I also know quite a few professional gamblers who are making a living but would make a much more profitable living in some other field as they are usually very talented people.


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## LDFerguson (23 Jun 2011)

Brendan Burgess said:


> You should not be making any pension contributions for yourself or anyone else, as you get no tax relief on them. When you draw down a pension, it is taxable. So it makes no sense to put net income into a fund which will be taxed when it comes out.


 
Hi Brendan, 

What I was saying in my earlier post was that he can gift the money to his mother and then SHE can make the pension contributions for herself.  In this respect she would be no different from anyone else making pension contributions.  She might be on 41% tax now.  She might be paying little or no no tax in retirement.  

Cheers, Liam


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## Swayner (5 Aug 2011)

*Bes*

BES(Business Expansion Schemes) are a good way to set up a pension for your parent heres how it works.
You invest a lumpsum of between 5k and 150K into an approved BES company and you are issued with shares from that company.
You will receive tax relief at your marginal rate but you must keep the shares for 5 years, or you could end up paying back the orignal relief that you got.
Best explained by an example

A man Earns 42K a year so that means that 10k of his Income is taxed at 42%.
If he decided to invest the 10k in a BES company than he ends up paying tax only on the 32K at 20%, the below is an example from simple.ie whom are an agent for the BES Scheme they charge a 4% comission and predict a return of 15% on your investment so you can see from the below that 6.3K Cost to you doubles in 5 years.

Investment amount €10,000
Commission( 4% ) € 400
Income tax Refund in 2011 € 4,100
Net Cost To Investor ( € 6,300 )
Total Payback( 15% p.a. ) € 13,061

BES Schemes have been around along time, and like all these schemes their is risks associated but if you invest wisely their no more risky than a self administered pension fund, and you have your lump Sum after 5 years. Its also a good way to do your bit for the economy as the BES Companies are Irish companies Involved in tourism, R&D and manufacturing etc.


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