Nationwide Seeking accountant for contractor who can help maximise pension

[coolaboola]

Hello folks,

Not sure if this is a Recommended Advisor or a Tax or a Pensions question ... perhaps all of the above!
Mods: please feel free to rehome this query to the appropriate forum.

What I'm looking for: An accountant/accounting firm who can manage my invoicing (I'm a contractor) while helping me maximise my pension contributions.

About me: I 50 and work as a contractor for a company. My income varies from month to month, depending on the number of days I work.

My current accounting company has set me up as director of an umbrella company. They invoice the company I work for each month on my behalf.

I have set up a Non-standard PRSA and a direct debit to pay a fixed amount from my umbrella company into my PRSA each month. These contributions are treated as employer contributions. This PRSA is not connected to my accounting company.

So far, so very ordinary.

The Problem: I want to maximise my pension contributions. Ideally I would be making as large contribution as possible into my PRSA each month. However, because my contribution each month needs to be fixed, I set it such that I could always be able to cover the contribution, even on my lowest earning month. So my contributions are lower than ideal. Ideally I would contribute much more each month.

The rules changed this year such that employer contributions to pensions must not exceed gross salary (gross salary = monthly income - pension contribution). This means that my maximum pension contribution can only be 50% of my income each month (roughly - less some small expenses). This means that now my already-low pension contribution is too high on short months.

My Accountants' Solution: Pause pension contributions on short months. This is undesirable because:
1. It further reduces my pension contributions when my goal is to maximise my contributions
2. It requires my intervention and I want this to be as hands-off as possible
3. My PRSA provider has been very slow to respond (in fact I'm still waiting on a response), so I'm not sure asking for pauses and restarts is going to be feasible.
Alternatively they have suggested reducing my monthly pension contributions even further. Again, this is contrary to my goal of maximising my pension contributions.

My Preferred Solution:
Ideally, my pension contribution would be calculated each month to be 50% of my income that month (less expenses).
If it has to be a fixed monthly contribution, I proposed that my accountants hold a buffer of funds in my umbrella company account to be used for my salary in short months. They have said this isn't possible.
Alternatively I have proposed reducing the frequency at which I'm paid from monthly to every two months or quarterly (to 'flatten out' the occasional short month). I'm awaiting their response.
I'd also like a way to make a lump sum additional employer contribution at the end of the year (to top up my contributions to 50% of my total annual income)

How are other accountants/contractors maximising pension contributions in similar situations?

So, that's why I'm looking for an accountant who can do my monthly invoices while helping me maximise my pension contributions.

 

[T McGibney]

Why are you happy to rely on an accountant to do your monthly invoicing? Should you not be doing this yourself?

Would it not be a whole lot simpler to save as you go along and make a single pension payment towards the end of each year?

FWIW, in my view, your accountant should have nothing to do with your pension apart from claiming the tax relief on your contributions in case of a conflict of interest.

 

[Savvy]

To keep it simple I would calculate what I expect my lowest monthly income to be. Set your monthly DD as 1/2 of that towards your pension.

In December of each year then pay an additional amount so that you are contributing to pension what you are paying yourself.
I can't see any pension provider not taking an adhoc amount.

 

[coolaboola]

Why I don't do my own accounts:

1. Money! (And enjoyment) Doing my own accounts each month would take a lot of admin time for which I would not be paid (and I would not enjoy and am not particularly good at). Instead I can spend that time working as a contractor at work I enjoy and am particularly good at and am paid well for. So the sums are easy: It is worth it to me (and the company I work for) to have the accountants handle invoicing.
2. More importantly, they handle the setting up and running of the umbrella company of which I am a Director. I choose to be a Director specifically to avail of the facility to maximise my employer pension contributions. But right now I'm not able to benefit from this. Hence my query.

Lump Sum: Yes, I would like to save as I go and make a lump sum employer contribution at the end of the year. Unfortunately, my current accountants do not facilitate this.

Accountant Has Nothing To Do With PRSA: Yes, as I stated in my original post, my accountants have nothing to do with my PRSA. I have set up a direct debit to withdraw my monthly contribution from my umbrella company account. That is the extent of any association between my accountant and my PRSA.

 

[coolaboola]

To keep it simple I would calculate what I expect my lowest monthly income to be. Set your monthly DD as 1/2 of that towards your pension.

In December of each year then pay an additional amount so that you are contributing to pension what you are paying yourself.
I can't see any pension provider not taking an adhoc amount.

Thanks Savvy. That's what I've done for the monthly payments.

The (pretty big) problem is that my accountants do not appear to be able to facilitate the lump some payment at the end of the year (as it is an employer contribution it has to come from my umbrella company - I make separate employee contributions myself) They seem to be unable/unwilling to hold funds back from my monthly income to facilitate such a payment.

 

[GSheehy]

The solution is a Master Trust Executive Pension.

You can do a max funding quote yourself so you know exactly the 'limit' you/the company can pay monthly/annally on your behalf. At 50, I'd say the max would be kinder to you than a PRSA (salary/service dependent).

There are some teething issues with the recent changes and it's up to the PRSA policy holder to adapt. The PRSA Providers won't be policing the limits.

One might argue that the only time to make an accurate contribution is at year end when you know exactly what your gross salary was for year. Monthly will be messy. Paying lump sum (now) won't be a runner because you might leave the company and you'd then have overpaid and have to pay the BIK.

I understand that the providers have gone back to Revenue for absolute clarity as the current reading is as above. Hence the Fenero/Iconn interpretetion. Some agreement on aggregate might work but I'd asy Revenue are fairly peed off with some providers following the fallout of what brought about the reversal in the first place. Pension Authority may have something to say on it too.

Some providers now have a big product decision to make. Enter the MT Executive Pension market, or not. It won't be uncommon for directors to have both products.


Gerard

www.prsa.ie

 

[coolaboola]

Thanks Gerard.

I hear what you're saying about the Master Trust Executive Pension and the challenges of calculating how much of a lump sum

For a contribution to be considered an employer contribution, does it have to come from my umbrella company? If so, my problem is getting my accountants to make either variable contributions (c. 50% of each month's income) or lump sum contributions (holding money back in my umbrella company account until the end of the year, for example) from my umbrella company. I can't do this myself. I'm not sure if the reason they won't accommodate my request is regulatory (in which case all accountants will be similarly limited) or their own decision (in which case, either they may change their minds or there may be accountants who offer this service).

I can understand why accountants who offer the sort of service I use may want to keep life simple. A direct debit withdrawal of a fixed amount from my umbrella company's account to my PRSA each month requires no intervention by them. Having to calculate % contribution each month and arrange transfers, while not rocket science, is more hassle. As is holding money back to make a lump sum payment at the end of the year (or to cover shortfalls in salary in short months). But they are not offering these options and the solutions they are offering are not in my financial best interest, requiring me to reduce my pension contributions and to 'miss out' on tax savings of contributing a maximum contribution.