New Ireland Assurance Provider of choice in the Life and Pensions Market NUI GALWAY PENSION & RETIREMENT PLANNING PRESENTATION- AVCs 9.30 11.30 14.15 Presenters: Noel Hackett - QFA Senior Pension Consultant New Ireland Assurance Galway Dearbhla Cullen- State Street Global Advisors Senior Relationship Manager | SSgA | Wednesday, 24th June 2015
Who Should I Contact: Pensions Office NUI Galway OR Ph: (091) 495028 ext: 5028 Email: pensions@nuigalway.ie OR Noel Hackett, QFA, Pensions Consultant New Ireland Assurance, Atlanta House, 36 Dominick Street, Galway Tel: (091) 563023 Mobile: 086- 8186163 Email: Noel.hackett@newireland.ie
About New Ireland Assurance New Ireland is a leading Life Assurance Company in Ireland Provides life assurance, pensions & investment solutions to over 500,000 customers Established almost 100 years ago, New Ireland was the first wholly Irish owned company to transact business in Ireland New Ireland remains Irish owned to this day as part of the Bank of Ireland Group
The Company has gone from strength to strength, from just £1,000 in assets in 1918 to over €13.4 billion today (Feb 2014) New Ireland employs over 1,100 people with the main Head Office on Dawson Street for over 85 years Have world class investment partners for our existing single manager portfolios including State Street Global Advisors Ireland, Bank of New York Mellon Asset Management and Kleinwort Benson Investors
Agenda Your Main NUI Galway Pension Schemes Sample Pension Benefit Statement- Scope for Notional Years and AVCs 3 ESMA Risk Rating Scale 1-7 4.The Finance Act 2015 and changes that may affect you 5Investment Market Update and Investment Outlook for 2015- Dearbhla Cullen SSgA 6Fund Choice, Fund Manager, Fund Performance and Fund availability under your AVC Scheme
Benefits at Retirement At retirement your benefits will come from:- State Pension ( PRSI Contributions) NUIG Scheme (s) Purchase of Notional Years Additional Voluntary Contributions ( AVCs ) Personal Accumulated wealth/savings inheritances
NUIG Pension Scheme Defined Benefit Scheme Scheme provides Pension Lump Sum ( Gratuity ) Spouses Pension Increases during course of payment Death in Service Benefit Actual benefits depend on when you joined Please refer to your NUIG Annual Benefit Statement. ( Individual Consultations with Noel Hackett)
Key Dates Pre 95 – no state pension, higher pension through NUIG Post 95 - employees pay PRSI and receive: State Pension Lower pension from NUIG 2004 Future employees have minimum RA of 65 Immediate early retirement pension available to: Existing employees from 50 New employees from 55 2013- Career Average Earnings
State Pension 2021 from age 67 2028 from age 68 From 2014 Single Person: €230.30 per week Married Couple: €383.80 Applies to all employees who joined since 1995 State Pension 2014 from age 66 2021 from age 67 2028 from age 68 (Social Welfare will pay Job Assist or other S/W payment- where for whatever reason S/W payment not allowed, a Supplementary Pension maybe paid by NUIG )
Early Retirement Was always allowed but only as a deferred pension Changes from 2004 Existing employees from 50 New entrants from 55 Immediate pension payable Early payment reduction
Bridging the Gap - 2 Options Purchase of Notional Years of Service Through NUI Galway Pensions Office AVC Scheme Through New Ireland Assurance
Notional Years Employee can buy “notional years” Defined Benefit basis Must buy year with all the “trimmings” Pension Gratuity Spouses Pension Pension Increases
AVC Scheme Tax Relief Tax free growth Fund Choice Flexibility Options at retirement Inheritance Tax Planning Fund for tax free lump sum, taxable lump sum
Employee Tax Relief Limits (including AVCs) Age % of Remuneration Up to 30 15% 30 - 39 20% 40 - 49 25% 50 - 54 30% 55 - 59 35% 60 + 40% An earnings cap of €115,000 (2015 apply to Employee Pension Contributions for the purpose of tax relief The above limits include contributions to NUIG Pension Scheme
Tax Relief- The Importance!!! Monthly Contribution €100.00 Standard rate Marginal Rate Tax Relief €20.00 €40.00 Net Cost €80.00 €60.00 Saving in Bank/Credit Union Earn gross either €120 or €135.00 before PAYE/PRSI/USC/PRD €100.00 net invested in Bank/Credit Union Then its subject to DIRT Tax currently 41% and PRSI 4% OR Save €100.00 in Pension ( AVC or Purchase Yrs) that costs you €60.00 or €80.00 or Save €100.00 that costs you €120.00 or €135.00 Contributions and tax relief operated at source
Importance of Taxation –PRE/POST Retirement Total gross contribution @20% @40% of €100.00 €100 €100 Less tax relief -€20.00 -€40.00 NET cost of contribution €80.00 €60.00 Post Retirement Assume €100.00 is still €100- no growth Tax Free lump sum €100.00 get you €100.00 Nil tax ( PRSI –age exemtion limit ) €100.00 get you €95.00 Standard rate of tax €100.00 get you €74.00 Marginal rate of tax €100.00 get you €54.00 Estimates only.
SAMPLE PENSION STATEMENT and Scope for AVC and Notional Years Purchase 1.NAME Noelle Hackett 2. Employee no 0123457e 3. Gender female 4. Civil Status single 5.Date of birth 20.09.1957 6. Starting pension 24-Jul-01 7.Starting date (JPS) 01-Nov-02 8.Date of Retirement 20-Sept-22 9.Age at retirement 65 10. Pension code 14 11. Location in College Secretary for XXX 12. PPS no 1234567A 13. Salary (current) €56,602 12D Pt 5 14. Pension Fraction 60ths 15. Pension Fraction (alternative) 80tths Social Welfare (A) 11,971 (B) 23,951 (C) 17,963 (D) 39,919
SAMPLE PENSION STATEMENT and Scope for AVC and Notional Years Purchase- Contd Service Years Claw back 16.Actual Service 19.902 0 Purchased 0 0 Transferred Unpaid leave -0.0027 Total (MAX 40) 19.8997 17. Pension based on sixieths (1/60) Years*Salary (less C acove *1/60 €12,815 Less clawback 1/9*lump sum c/b €43 €12,772 18. Pension based on eightieths 1/80 ( alternative to 17) Service X (3.33OAP or Sal if less3.33 OAP)200 €3,972 per annum Service X (Salary-3.33 OAP)80 €4,150 per annum €8,122 per annum Plus Lump Sum Years *Salary*3/80= €42,239 First €200K Tax Free Less Clawback years % of Salary €388 Net of Clawback €41,851
Continued. 19. Death Benefits in retirement Spouse or civil Partners and Childrens Pension in retirement Spouse or Civil Partners Pension ½ of pension based on (1/80) €5,550 per annum Childrens Pension €1,850 per annum ( Social welfare payable to spouse on death under S/W rules) SERVICE BREAKDOWN THEN LISTED.
OPTIONS FOR NOELLE HACKETT 1. Can Purchase Notional Years Service to go from 19.902yrs to 40 Yrs Max- purchase an additional 20.1 yrs 2. Fund AVC for (a) Bridge GAP Tax free Lump sum Revenue permits 120/80ths for greater than 20yrs service, 19 yrs =114/80ths of Final Salary [114/80 of €56,602 = €80,657 NUI Galway provide 3/80ths for every actual Year (59.67/80ths )€42,239 Shortfall between Revenue and NUI Galway =€38,418 FUND AVC FOR €38,418 tax free in addition to NUI 2(b) Fund AVC to take upto €80,657 TAX FREE from AVC – opt not to take Tax free Lump sum from NUIG in Section 17 , and take higher pension €12,815 per annum . Permitted once your Pension is less than 50% of your salary after Tax free Lump sum – This case €12,815 is only 22.6% and not 50% of €56,602
Options Continued Decision to Take Tax free Lump sum or Higher Pension. This Case Pension of €12,772 per annum Or Pension of €8,122 per annum + €42,239 Lump By taking lump from Pension You are losing €4,650 per annum Guaranteed for LIFE Divide Lump sum by €4650 and that equals 9.08 YRS So if you were to live for at least 9 yrs post retirement or longer then You need to consider the VALUE, the correct choices to be considered.
ESMA RISK RATING – What is yours? European Securities Market Authority (ESMA) Jan 2014 Guidelines on all investment funds throughout Europe assessed for risk rating 1-very low 2 -Low risk 3- low to medium 4- medium risk 5- medium to high 6- high risk 7- very high risk Questionnaire 15 questions using EValue to ascertain your Risk profile Email Noel.hackett@newireland.ie and ask for Questionnaire, and your free Report. Risk for both regular investing and lump sum investments.
2015 Finance Act- Main changes Pension Levy 0.15% in 2015- Abolished in 2016 Standard Fund Personal Threshold to €2m Defined Benefit Changes DIRT Tax 41% plus 4% PRSI Inheritance Tax Threshold Gift Tax Age Exemption Limit @ Retirement
AVC Account- Pensions on line Facility www.newireland.ie Pension Schemes On Line (PSOL ) To track your own pension account Secure access to your account Values updated daily New Ireland Investment Centre http://fundcentre.newireland.ie Up to date price\performance information Monthly factsheets – include asset split, fund size etc Graph performance of funds
- Lewis Carroll, Alice in Wonderland “Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to”, said the cat - Lewis Carroll, Alice in Wonderland
Lets begin by reminding ourselves of the cornerstone questions of any investment decision….. Objectives: What do you want to achieve? Timeframe: How long do you have to achieve it? Risk Profile: How much risk can/will you take to achieve it? Every aspect of investment advice should revolve around always being aware of your views on each of the three key points above! 26
The events of 2008 still fresh in our memories! Sept. 8th Fannie Mae & Freddie Mac under government control. Sept. 14th Lehman's files for bankruptcy Sept 15th Bank of America purchases Merrill Lynch Sept 16th Fed takes 80% stake in AIG for $85bn Sept 18th Lloyds TSB takes over of HBOS Central Banks globally pump $180bn of liquidity into the market Market ban on short selling Sept 19th Paulson announces ‘Troubled Asset Relief Program’ – markets soar Sept 21st Goldman's Sachs & Morgan Stanley become Bank holding companies Sept 26th Overnight collapse of Washington Mutual in the biggest US bank failure ever. Sept 29th Announcement that Bradford & Bingley and Fortis are being nationalised. Citigroup agrees to buy Wachovia's banking business. Sept 30th News that Irish government will guarantee all deposits and debt of main credit institutions for 2 years US Lawmakers vote against proposed treasury rescue package And then came October!! I’m sure all of us here today, recall the events of 2008, and just how difficult a period this was for our clients, but not just our clients, indeed how difficult a period it was for us as advisors. What we see here was a month during which in reality we probably came close to the brink of a global financial meltdown. I’ve commented many times that if you had shown me this slide during 2005 or 2006, I’d have suggested that it was straight out of a science fiction movie. However it wasn’t it was real, and then came October…..
1st week in October 08: As bad a week in markets as we’d seen in decades! This is just a snapshot which clearly shows the impact a single ‘bad week’ in the markets can have, with losses of 20% to 25% in just a few days (pointing at the screen with laser pointer). This as I’ve said, was a very difficult period for us all.
This left many Investors very nervous about their future finances, long after the market began to recover! Is it safe to Come back out? “Both optimists and pessimists contribute to society, the optimist invents the airplane, the pessimist the parachute”….George Bernard Shaw
S&P 500 Index - Total Returns 1926 to 2014 annualised returns of the Standard and Poors equity index. S&P 500 Index - Total Returns Year Year Year Year Year 1926 11.62 1945 36.44 1964 16.48 1983 22.51 2003 28.68 1927 37.49 1946 -8.07 1965 12.45 1984 6.27 2004 10.88 1928 43.61 1947 5.71 1966 -10.06 1985 32.16 2005 4.91 1929 -8.42 1948 5.50 1967 23.98 1986 18.47 2006 15.80 1930 -24.90 1949 18.79 1968 11.06 1987 5.23 2007 5.49 1931 -43.34 1950 31.71 1969 -8.50 1988 16.81 2008 -36.99 1932 -8.19 1951 24.02 1970 4.01 1989 31.49 2009 26.46 1933 53.99 1952 18.37 1971 14.31 1990 -3.17 2010 15.06 1934 -1.44 1953 -0.99 1972 18.98 1991 30.55 2011 2.11 1935 47.67 1954 52.62 1973 -14.66 1992 7.67 2012 16.00 33.92 1955 31.56 1974 -26.47 1993 9.99 2013 31.90 2014 13.69 1937 -35.03 1956 6.56 1975 37.20 1994 1.31 1938 31.12 1957 -10.78 1976 23.84 1995 37.43 1939 -0.41 1958 43.36 1977 -7.18 1996 23.07 1940 -9.78 1959 11.96 1978 6.56 1997 33.36 1941 -11.59 1960 0.47 1979 18.44 1998 28.58 1942 20.34 1961 26.89 1980 32.42 1999 21.04 1943 25.90 1962 -8.73 1981 -4.91 2000 -9.10 1944 19.75 1963 22.80 1982 21.41 2001 -11.88 2002 -22.09
Cash funds offer little in terms of return….. I think undoubtedly, interest rates will continue to fall over the coming months. As the banking system progresses from ‘survival mode’ back to ‘profitability mode’ margins will be squeezed and with our ECB rate at just .75% and Euribor rates at historic lows, it’s increasingly difficult to see how or why banks will continue to offer these highly unprofitable rates. With EU inflation on the rise and inflation in Ireland lurking about the 2.5% mark, we will all need to get back to considering life after the deposit rate! 2011 > 5% 2012 > 4% 2013 .5% 2014 .25%
Inflation may well be an issue in the near future. Challenge!
Equities Property Deposits Alternatives Bonds But we still only have a finite number of assets in which to invest! Equities Equities Property Deposits Property Alternatives The questions coming to me the whole time right now is what do we sell in this enviornment? Stick to fundamentals and lets remember what we said at all our portfolio building sessions, the fundamentals of investment don’t change all that changes is the market enviornement! Bonds
important to investors after the great financial crisis of 2008. Avoiding significant losses should be the starting point for every successful investor! Loss Required Gain -20% +??% -40% +??% -60% +???% -90% +???% Minimising losses and reducing investment risk has become more and more important to investors after the great financial crisis of 2008.
important to investors after the great financial crisis of 2008. Avoiding significant losses should be the starting point for every successful investor! Loss Required Gain -20% +25% -40% +66% -60% +150% -90% +900% Minimising losses and reducing investment risk has become more and more important to investors after the great financial crisis of 2008.
The power of stable returns The key learning from recent past…the power of stable returns. The power of stable returns Year 1 Year 2 Year 3 Total return A +20% -10% +29.6% B +35% +5% +27.6% C +10% +33.1% A +20% +20% -10% +29.6% B +35% -10% +5% +27.6% C +10% +10% +10% +33.1% Avoiding the big losses and taking a steady consistent approach to investment remains the best long term investment approach. As our clients are typically ‘backward’ looking in their approach to investment, they need to see how something has done before they are interested in investing in it, rather than what it has the potential to do. End of year 1, everyone wants a piece of fund B, end of year two everyone wants a piece of fund A…….However long term, the consistency of fund C remains the better prospect and clearly illustrates the point of reducing investment losses. “I have two basic rules to investment, Rule no1: Never lose money. Rule no 2: Never forget rule no 1”!! …… Warren Buffett Source: Newton
A complex market…which can be difficult to navigate Derivatives for Protection Tactical Asset Allocation Customer Questionnaires Property? Portfolio Construction ESMA? Total Return Strategies ¯ Protected Funds ¯ Manager Diversification Market Neutral Strategies Rebalancing? Regulation & Compliance
Investment Standard Suite Choice of 12 funds Independent fund managers Different risk levels
SSgA — A True Global Player €2.0 Trillion in Asset Under Management1 Over 400 investment professionals 27 Global Offices; 9 Investment Centres 24 Hour Trading Rankings: # 1 Global Endowment/Foundation Assets2 # 1 Sovereign Wealth Fund Assets2 # 2 Worldwide Institutional Assets2 Key Stats: We Manage Money for 9 of the Top 10 S&P 500 Companies3 We Manage Money for 6 of the Top 20 Wealthiest Countries in the World 3 1 AUM is $2.15 Trillion. This AUM includes the assets of the SPDR Gold Trust (approx. $37.1 as of 30 September 2013). for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent. Please note that AUM totals are unaudited. 2 Pensions & Investments, 31 December 2012. 3 Source: SSgA, as of 31 December 2013. S&P 500 top 10 by market capitalization as of 31 December 2013. Source: SSgA. Top 20 Wealthiest countries by GDP per Capita as of World Economic Outlook Database — October 2013. IREPRS-0681 39
SSgA: Size isn’t Everything…. But it Helps! Snap shot of how SSgA measure up against some local competitors Global AUM (€ Billion) Source: P&I/Towers Watson Global 500 year end 2012. IREPRS-0516 40
Passive IRIS Performance (as at 14.04.2015) Source: New Ireland Fund Centre as at 14 April 2015. Past performance is not a guarantee of future results. Performance returns for periods of less than one year are not annualized. The performance figures contained herein are provided on a gross of fees basis and do not reflect the deduction of advisory or other fees which could reduce the return. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in in Euro. Source: New Ireland Fund Centre IREPRS-0960 41
Passive IRIS Glide - Path Default Fund
Active IRIS Performance (as at 14.04.2015) Source: New Ireland Fund Centre as at 14 April 2015. Past performance is not a guarantee of future results. Performance returns for periods of less than one year are not annualized. The performance figures contained herein are provided on a gross of fees basis and do not reflect the deduction of advisory or other fees which could reduce the return. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in in Euro. 43
Active IRIS Glide Path
Lifestyling – Moving to safer assets as you get older A Different Approach… Lifestyling – Moving to safer assets as you get older Absolute Return Equities Bonds / Cash Passive approach… Active IRIS approach… Source: SSgA. This chart is for illustrative purposes only. IREPRS-0740
Target Return to Help Absorb Shocks Equities Early Years Growth phase Retirement Goal Equities + Absolute Return Fund Source: SSgA. This chart is for illustrative purposes only.
Target Return Strategy
Target Return Strategy Helps Manage Risk
Target Return Strategy Helps Manage Risk
Why SSgA for Passive? Passive Management 50 5050 5050 5050 5050 5050 Passive Management Why SSgA for Passive? SSgA’s Trading Advantage Helps Deliver World Class Index Tracking 24hr Trading — London, Boston & Hong Kong 282 million¹ shares traded every day 21.8%2 of shares matched between clients 0.02%3 trading commission paid on market trades = Low Cost and Efficient Trading All of what we have talked about up to this point is illustrated in the above graphs…world class index tracking, when compared to our competitors our index tracking capabilities and actual numbers (as per the graph above) are second to none and we continue to have some of the tightest tracking funds in the industry… 1 SSgA Global Trading Desk for year ending 2012. 2 Boston Global Passive Equity Desk average, Q2 2013. 3 Average Commissions paid on traded, Boston Global Passive Equity Desk, Q1 2013. Source: SSgA, All World Developed Equity Index, MSCI World Net Dividends Re-invested. Past performance is not a guarantee of future results. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in euro. The performance figures contained herein are provided on a gross of fees basis only, but net of administrative costs. The performance figures do not reflect the deduction of investment management or other fees which could reduce the return. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. IREPRS-0740 50 50 50
Passive IRIS – Global Equity (MSCI) Country Allocation Top 10 Stocks % of Fund APPLE INC 1.5% EXXON MOBIL CORP 1.3% MICROSOFT CORP 1.0% GOOGLE INC-CL A JOHNSON & JOHNSON 0.9% GENERAL ELECTRIC CO 0.8% WELLS FARGO & CO NESTLE SA-REG CHEVRON CORP 0.7% JPMORGAN CHASE & CO 51 Source: Country Allocations and top 10 Holdings: ssga.com as at 31.03.2014
Passive IRIS – Government Bonds Country Allocation Key Stats Government Bonds Long Government Bonds Approx. Duration 6.9 12.4 Approx. Yield to maturity 1.2% 1.9% 52 Source: Country Allocations Are the neutral benchmark weights for both funds. The Key Stats are provided by SSgA as at 31.03.2014 and are based on the underlying SSgA funds.
Barclays Euro-Aggregate Corporate Bond Index Passive IRIS – Corporate Bonds Key Stats Corporate Bond Fund Benchmark Barclays Euro-Aggregate Corporate Bond Index Effective Duration 4.7 Yield to maturity 1.8% Number of Issues 1,372 53 Source: Country Allocations and Key Stats are taken from SSgA.com as at 31.03.2014 and are based on the underlying SSgA fund “SSgA Euro Corporate Bond Index Fund”.
Performance Figures & Fund Choice FUND past 12months 3yrs pa 5yrs pa Cash Fund(1) 0.1% 0.1% 0.4% 1Gilt Fund (4) 9.0% 7.3% 5.9% BNY Mellon(4) 5.0% 5.4% 5.4% Elements (3) 0.1% 4.5% 4.5% Protected Assets (4) 3.4% 7.7% n/a Managed (5) 14.6% 16.2% 11.0% 2Consensus(5) 19.4% 17.5% 11.8% Ethical (5) 14.7% 15.2% 10.9% Evergreen (5) 16.1% 14.8% 10.3% Equity Fund(6) 18.3% 19.5% 12.9% Innovator (6) 7.7% 10.3% 5.5% Funds are updated each day. ESMA Risk rating 1 to 7 scale 18.06.2015. 1-GILT FUND 1 month -2.7% 3 month -8.2% yr to date -2.3% 2- Changes to Consensus Fund by SSgA
Passive IRIS – Property Key Stats (Excluding Cash Holding) Fund Size €495M # of direct holdings 47 % of fund in Direct Holdings 90% Approx. Initial Yield** (on direct property assets held) 6.6% Vacancy Rate (ERV of vacant assets expressed as % of total ERV of direct assets) 11.2% Weighted Average Term to Break* 6 Years Currency Hedging (level of currency hedging on Non-Euro investments) 50%–100% Source: SSgA. All data is at 31 March 2014 unless otherwise stated subject to change, and should not be relied upon as current thereafter. The weights above are exclusive of cash holdings. *As at 30 June 2013. **This is calculated on the basis of contracted rent divided by capital value of direct property holdings and does not take into account any of the costs associated with the fund or property acquisition costs. 55
Passive IRIS – Cash Primarily invested in AAA Rated SSgA Liquidity Fund Over 75 different Cash Instruments held with over 40 different large Financial Institutions Weighted Average Maturity of Cash Instruments is 38 Days Primary Focus is on Safety and Liquidity 56 Source: Stats taken from SSgA.com as at 31.03.2014 – SSgA EUR Liquidity Fund
So lets finish by looking at the correct investment process. 1. Your Goals objectives 5. Regular Review 2. Your Risk Profile 4. Investment Fund choice 3. Asset Allocation
What Should I Do Next? Contact: Pensions Office NUI Galway Ph: (091) 495028 ext: 5028 Email: pensions@nuigalway.ie or Noel Hackett, QFA, Pensions Consultant New Ireland Assurance, Atlanta House, 36 Dominick Street, Galway Tel: (091) 563023 Mobile: 086- 8186163 Email: Noel.hackett@newireland.ie
Any Questions? Thank You for attending
Individual Consultations Available Noel Hackett will be available (9 – 5pm) for Confidential Individual Consultations Concourse Room AC 203 (near Smokeys/BOI ) Thurs 25th June 2015 & Friday 26th June 2015 Contact: Karen Costello/ Jacqueline Joyce Extn 5901/5028 Karen.costello@nuigalway.ie Jacqueline.joyce@nuigalway.ie