Financial planning for the future is something that is not always at the forefront of our minds. The question that is more usual is how to finance life and art at the same time. For quite a few writers this means having PAYE and/or non-art related jobs to pay the bills, and dedicating whatever time is left to a practice.
Outside earnings under the artists tax exemption scheme, other sources of income from part-time and full-time employment cannot be claimed for and are therefore subject to standard levels of taxation. When this is combined with some thoughts towards future financial arrangements, it is a sobering thought that most writers are part of the more than one million Irish workers who have no pension arrangements. Many are reliant on the state pension to provide for them in retirement. At present there are five working people paying tax to every person claiming the state pension, however by 2050 it is expected that this will be just two working people to every one pensioner. The reason for this is that that our life expectancy is increasing while the birth rate in Ireland is levelling off. This is why writers need to take more a more proactive approach to their retirement planning.
Personal Retirement Savings Accounts (PRSA) were introduced by the Government in 2003 as a pension product that is low-cost, flexible and fully portable. The government is aiming to increase pension coverage in Ireland.
Taking into consideration, that writers may have a varied income, Words Ireland wanted to explore how writers can best take advantage of the tax benefits on non-creative income, as well as put in place some financial planning for the future. Ross Ingram of TAB has provided some examples of why the PRSA is suitable for writers.
PRSA for Writers and Artists
Some examples why the PRSA is suitable for writers and artists. . .
You decide how much you want to pay on a monthly, annually or once off lump sum basis. If you want to stop paying contributions for a time, you can simply halt them and restart at a time that suits you.
One of the great features of a pension is they are a very tax efficient way of saving for your retirement in different ways:
- Tax relief on your contributions
- Tax free growth on the value of your fund
- Tax-free cash at retirement
Subject to your age related limits, you will receive full PAYE relief on the contributions that you make to a PRSA.
A PRSA is individually owned so you can pay into it while you are self-employed, or bring it with you from job to job if your employment status changes.
The standard charge on a PRSA is 5% but this is at the discretion of the pension advisor or pension provider. The charge is usually dependant on the level of contribution payable and the advisory fee paid to either of the above. All PRSA providers must be registered and the Pensions Board/Pensions Authority and they would be able to provide you with a comprehensive list.
Many accounts have a minimum of €300 per year or €25 contributions per month as standard. PRSA’s and most pensions provide flexibility to cease and recommence contributions on a regular basis at no cost or penalty to the policyholder. Payments are usually collected monthly by Direct Debit so it is up to the policyholder to contact the PRSA provider if they ever need to suspend the payment for a month or a number of months.
All PRSA providers must be registered and the Irish Pensions Authority who can provide you with a comprehensive list of providers on request.
Advice for Writers
Like most things financial, there are sets of conditions and also a range of variables that need to be taken into consideration when talking about one’s own personal situation. For this reason, we have asked Ross to make himself available to Words Ireland’s constituency of writers to discuss planning for the future. To find out more Ross can be contacted on 01 6768633 or firstname.lastname@example.org. As with all of our support services, your feedback is very important. Therefore, please let us know how you get on (email@example.com) and we can then provide this back to Ross and TAB so that they can improve their service to writers.
The Pensions Authority
Taxation Advice Bureau
independent financial and tax consultants