PRSA or EPP - advice for creative professionals.

[JackBurrell]

Hi,
Myself and my partner are both self employed, early 30's, work in the creative industries.
We don't have great financial heads but getting better over the last couple of years, thanks to research and forums like this one.

We both have a years worth of emergency funds (more than standard due to being self employed.) and saving for a mortgage.
We're currently trying to set up our pensions, however our situation is a little unusual.

We both operate as sole traders with our own clients, this is where all of our income comes from.
However, we both also have a Ltd. company that mainly operates as a production company, we currently don't trade through the company but it acts as an umbrella for both of us to develop projects and apply to funding bodies etc.

Would we be better off having individual PRSAs or start to put all of our business through the Ltd company, draw salaries and set up an executive pension plan?
The PRSAs appeal as we have control over the size and frequency of our contributions, however I know long term the EPP is more tax efficient and would allow us to make larger contributions through the company.
Right now we're struggling to find an advisor who is truly independent, fee based, unbiased, not a tied agent etc. so if anyone has any recommendations in that area we would really appreciate it.

Reading the likes of Jl Collins, would it be ill advised to set up our own pension through someone like Davy and investing in something that tracks the S&P500?

Hope this isn't too long winded and thanks in advance for any advice or recommendations.

 

[Dave K]

Hi Jack,
As you say in regard to the Ltd company that opens up more opportunities in regard to funding your pension. You are not fixed by the revenue limits (currently 20% while in your 30s) and the company can potentially fund a lot more.
In regard to recommendations in the area of an independent advisor, feel free to have a look at pensionfreedom.ie as I feel it ticks most of your requirements.
Dave

 

[Brendan Burgess]

We both have a years worth of emergency funds (more than standard due to being self employed.) and saving for a mortgage.
We're currently trying to set up our pensions, however our situation is a little unusual.

Hi Jack

The key is that you are saving for a mortgage. That is your priority.

Forget about pensions until you have the mortgage sorted. And then get it down to a comfortable level.

If you have a limited company, you will be able to stuff your pension at a later date.

Brendan

 

[JackBurrell]

Hi Jack

The key is that you are saving for a mortgage. That is your priority.

Forget about pensions until you have the mortgage sorted. And then get it down to a comfortable level.

If you have a limited company, you will be able to stuff your pension at a later date.

Brendan

Thanks for your response Brendan. Much appreciated. When you say a comfortable level do you mean the mortgage repayments?
We have the 10% saved as first time buyers but for us this feels like the minimum target. We're planning to save for another while yet and have a much higher percentage with the goal being to have a smaller mortgage and lower repayments in the long run.

To be honest, you're the first person to mention this to me, it seems to make sense to focus all our efforts towards the mortage for the moment. I think it's our age and then the tax relief on the contributions that has us thinking we need to start the pension soon.
Do you have any recommendations off the top of your head for more info or further reading around to choosing to focus on the mortgage first?
Thanks again.

 

[Brendan Burgess]

Key Post - Pay down your SVR mortgage before starting a pension, but don't leave it too late

Summary of thread's conclusions (but it's worth reading the thread in full, as differing views are discussed) 1) If you have a cheap tracker mortgage, you should not pay it off early. Putting any spare cash into a pension fund(or some other investment) would be a lot better. 2) If your...

www.askaboutmoney.com

It needs a bit of updating. For example, lower loan to value mortgages are now cheaper than higher LTV mortgages.
The Central Bank's lending guidelines have been introduced which could make trading up more difficult.

So since it was written, buying a house and reducing your mortgage to a comfortable level is even more important.

Brendan

 

[Dave K]

That is a very valid point by Brendan,
The thread is a great read as well giving some good examples. As Brendan says some details need updating as some of the examples about savings etc dont take into account max funding for tax purposes etc and they are using figures which aren't 100%.

It all depends on your circumstances, you mentioned you have your 10% already but look to add to that.
Yes the lower the LTV the better rate you could get. So getting to 20%, 30% deposit could make a big difference for you. I am not sure exactly what rates based on LTV you can get.

But the tax element of a pension is something that you should still consider.
Is starting your pension this year compared to next year or year after going to make a massive different, probably not.
But starting your pension now compared to 10years time makes a big difference.

As Brendan says, maybe concentrate on the Mortgage this year and next, or until you are set and then it may be a good idea to look at options.

 

[JackBurrell]

Hi Jack,
As you say in regard to the Ltd company that opens up more opportunities in regard to funding your pension. You are not fixed by the revenue limits (currently 20% while in your 30s) and the company can potentially fund a lot more.
In regard to recommendations in the area of an independent advisor, feel free to have a look at pensionfreedom.ie as I feel it ticks most of your requirements.
Dave

Thanks Dave appreciate the input. Yes its starting to look like the Ltd company is a lot more effective. Any advice on where to look for info on the practicalities of making the switch? I'm thinking our accountant will be the first port of call.
Thanks for the link I'm going to looking into it.

 

[Dave K]

It can be, it gives opportunity to draw money from the company more Efficiently but depends on circumstances.
Yes I would contact your accountant and don't rush either into selecting an advisor. It costs nothing to have an initial chat with them and you will get a feeling if you are comfortable or not. If you can meet them also would be ideal(made slightly harder with restrictions in place at the moment).

Best of luck with it all.