1. www.mercer.ie Document Number PD014.1 University of Limerick AVC Plan 28 April 2009 Jim O'Neill-Mercer, Limerick Stephen O’Hanlon-Irish Life

2. 1 Mercer Agenda  Main scheme benefits  Additional Voluntary Contributions (AVCs)  Investments  Questions Document Number PD014.1

3. 2 Mercer Main Scheme Benefits- Appointed before 6 th April 1995  Retirement benefits: Pension  1/80 th of Pensionable remuneration for each year of reckonable service subject to a maximum of 40/80ths Plus  Retirement benefits: Tax free lump sum  3/80 th of Pensionable Remuneration for each year service subject to a maximum 120/80 th (1.5 times) Document Number PD014.1

4. 3 Mercer Example Pensionable service by retirement age: 40 yrs Pensionable remuneration €60,000 p.a. Pension Pension entitlement= 40 X 1/80 * €60,000 = €30,000 pension income p.a. Plus Tax-free lump sum 40 X 3/80ths X €60,000 = €90,000 Document Number PD014.1

5. 4 Mercer Main Scheme Benefits- Appointed on or after 6 th April 1995 (class A PRSI)  Retirement benefits: Pension  Pension 1/200 th of Pensionable Remuneration below 3 1/3 rd state contributory pension x Pensionable Service. PLUS  (where applicable) 1/80 th of Pensionable Remuneration over 3 1/3 rd state contributory pension X Pensionable Service.  Retirement benefits: Tax free lump sum  3/80 th of Pensionable Remuneration for each year service subject to a maximum 120/80 th (1.5 times) Document Number PD014.1

6. 5 Mercer Example Pensionable service by retirement age: 40 yrs Pensionable remuneration €60,000 p.a. State pension (Contributory) €230.30 X 52 €11,975 p.a. Limit= €11,975 x 3 1/3 rd = €39,918 Pension Pension entitlement= 40/200 X €39,918 p.a. + 40/80ths x (€60,000- €39,918) p.a. = €7,984 + €10,041=€18,025 p.a. + state €11,975 Total €30,000 pension income p.a. Plus Tax-free lump sum 40 X 3/80ths X €60,000 = €90,000 Document Number PD014.1

7. 6 Mercer WHY Should You Consider Making AVC’s  Short Service  Cost Neutral Early Retirement  Tax Free Lump Sum  Extra Flexibility Document Number PD014.1

8. 7 Mercer Maximum Gratuity  EXAMPLE – Salary € 80,000 – Service30 Years – Gratuity€ 80,000 X 3/80 X 30 = € 90,000 – Revenue Maximum €120,000 – Shortfall€ 30,000 – Solution – Build An AVC Fund Of € 30,000 And Take It Tax Free At Retirement Document Number PD014.1

9. 8 Mercer WHY AVC’s ?  Tax And Prsi Relief On Contributions  Tax Exempt Fund  Option To Take Portion Of Fund Tax Free  Flexibility In How To Use Fund At Retirement But  Pensions Subject To Income Tax  Fund Cannot Be Accessed Until Retirement Document Number PD014.1

10. 9 Mercer Contribution Limits AGE CONTRIBUTION LIMIT  UP TO 3015%  30-39 20%  40-49 25%  50-54 30%  55-59 35%  60 and over 40% Maximum net relevant earnings of €150,000 for 2009 Document Number PD014.1

11. 10 Mercer Illustration Of Tax Relief  Monthly Contribution€200€200  Tax Relief ( 20%/ 41%) €40 €82  Prsi Relief ( 2.90%) €6 €6  Net Cost To You€154€110 Document Number PD014.1

12. 11 Mercer What will €200 per month be worth at 65? Assuming 6% fund growth, 3% contribution increases Cost after tax at Years to Retirement AVC fund 41% + PRSI 20% + PRSI 25 €157,700€46,200€64,800 20 €102,900€34,200€47,800 15 €63,000€23,600€33,000 10 €34,300€14,600€20,400 Document Number PD014.1

13. 12 Mercer What happens to your AVCs …when you retire? You can use them to:  increase your retirement income  increase your dependants’ pensions  if not part of main scheme benefits, provide for increases on your retirement income  increase or provide a tax-free lump sum  invest in an ARF (Approved Retirement Fund) Document Number PD014.1

14. 13 Mercer Approved Retirement Funds (ARF’s)  Introduced for AVCs in Finance Bill 2000  More Flexibility  No Longer Have to Buy an Annuity  You Must Have a Guaranteed Pension of €12,700 P.A to Avail of ARF Options  No Tax on Investment Income/gains  Can Draw Down Money at Any Stage  Income Tax Paid on Any Drawdown From ARF  ARF Becomes Asset in Your Hands  You Control Investment Strategy of Fund  3% Deemed Drawdown in 2009-phased in from 2007 Document Number PD014.1

15. 14 Mercer What Happens On Your Death ?  The Value Of Your ARF Forms Part Of Your Estate  Tax Treatment Of ARf On Your Death  FUND TRANSFERRED TO INHERITANCE TAXINCOME TAX  SPOUSE (ARF) NONE NONE  SPOUSE (LUMP SUM) NONE PAYE ( HIGHER RATE )  CHILD OVER 21 NONE ONCE OFF (STANDARD RATE)  CHILD UNDER 21 POTENTIAL NONE Document Number PD014.1

16. 15 Mercer Who Will The ARF Option Suit ?  Those Who Consider Their Main Pension Scheme Income Sufficient In Retirement  Those Who Do Not Need A Regular Income From Their AVC Fund But Who Want The Flexibility To Take Ad Hoc Amounts  Those Who Wish To Pass On The Fund To A Relative On Death  Those Who Do Not Need Extra Income Now But May In The Future Document Number PD014.1

17. Investment Considerations Document Number PD014.1

18. 17 Mercer AVCs Vs Notional Service Purchase (NSP)  NSP guarantees the buy back of years to make up the shortfall in pension.  AVCs don’t offer such a guarantee. The fund value at retirement depends on certain assumptions: – Contributions will increase by 3% – Salaries will increase by 3% – Fund assumes to grow by 5% pa-this may be more or less than the actual return. – Charges remain the same Document Number PD014.1

19. 18 Mercer AVCs Vs Notional Service Purchase (NSP)  We recommend that a member gets two quotations: NSP quotation from the HR department. AVC quotation from Mercer, then compares both. Document Number PD014.1

20. 19 Mercer Plan Charges  5% Charge on Regular Contributions  1.5% Charge on Single premiums  Policy Fee €1.76 per month. (Indexed each year)  Annual Fund Management Charge – Exempt Consensus Fund 0.65% – Exempt Active Managed Fund 0.75% – Secured Performance Fund 1.0% – Capital ProtectionFund1.00% Document Number PD014.1

21. 20 Mercer Question Time Document Number PD014.1

22. 21 Mercer FURTHER INFORMATION CONTACT Jim O’Neill Mercer Crescent House, Upper Hartstonge St. Limerick. Tel: 061-313756 Mobile: 087-2205176 Email jim.o’neill@mercer.com Document Number PD014.1

23. www.mercer.ie Document Number PD014.1