Financial Planning Through the Pandemic It’s never too early to plan for your retirement or to ensure you are maximising your pension When snails start crawling up walls, they do so because they know a storm is coming. Anyone who has tried to run a business through the last 12 months certainly knows what it is like to try to survive a storm. Day- to- day budgeting made trigonometry look easy when suffering the loss of reliable income streams, coupled with the significant costs of the rules imposed. The frequent changes in plans as to when doors could reopen, plans for winter stock lost, and the uncertainty whether summer stock would be needed has left shortterm financial planning in disarray. While there has been some support for business owners and significant propping up of the economy by the Government, all astute businesspeople know that this will all have to be paid for. There is a feeling that, unfortunately, the tail of the storm has still to come. Financial planning for retirement remains as important now as it was before the pandemic. It is important to not only ensure you are making enough provision for your retirement plan but also to ensure that you are maximising the income tax benefit of proper pension planning. However, a fresh coat of paint is also needed now that the doors have reopened. Can business owners afford both? MAXIMISE INCOME TAX SAVINGS
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Business owners sacrifice their quality of life and lose countless unrecorded hours, even in good times, to ensure their enterprises run smoothly. There is a sense now that they will have to sacrifice even more. Before the ink dried on the news of our reopening for business, there was talk of possible tax hikes in the future. All the taxes that business owners are used to paying have been mentioned, including income tax, USC, PRSI, property tax, VAT, capital taxes, and more. One hopes that the national fiscal policy exemptions and protections previously afforded to our hard- earned and well-deserved pension funds will be maintained. Good financial planning will ensure that you are maximising the scope of the income tax savings that are available to you. After all, when explained in simple terms, pensions are tax- efficient savings schemes. Another significant concern is whether the value of our money will hold? Many economies worldwide have an uphill struggle ahead to recover from the pandemic. Even aside from the pandemic, we have yet to count the real cost of Brexit. We constantly hear of the increasing costs of business, worldwide inflation, and corrections coming. Banks charging negative interest rates is also a new norm. All such factors have been known to affect not only the buying power of the money we earned in the past but also the real value of investment and pension funds. This time last year, investments including pensions
experienced a sharp significant drop in value. Thankfully, most have recovered to pre-pandemic values for now. Now, the perpetually recurring question is: Is there anywhere you can place hard- earned money, including pension savings, to improve the chances of beating the looming uncertainty? NEW CONSIDERATIONS It appears that environmental, social, and governance (ESG) considerations are new elements associated with investments. Investors appear to be placing greater emphasis on companies taking account of these ESG considerations. EU fiscal policies also appear to be pushing national governments down the same direction. This may translate into easier tax treatment for companies and investment funds that stick to these principles. Word on the street is that funds that place greater emphasis on companies including ESG considerations are showing more positive returns. If business owners maximise tax exemptions available to them and keep the value of their investments growing in the tail of the storm created by the pandemic, they can protect their financial worth. Financial advisors can provide direction to business owners. To survive a storm, many snails have to abandon their houses to crawl up a wall. Financial advisors generally cannot help snails find new homes when the storm is over, but mortgages are for another day! Nick Redmond QFA O’Leary Financial Management Limited
