Private Client Seminar - Grant Thornton Ireland · Private Client Seminar Limerick 16 October 2019 ©2019 Grant Thornton Ireland. ... -06 May-06 -06 -07 May-07 -07 -08 May-08 -08

©2019 Grant Thornton Ireland. All rights reserved.

Ollie O’Connor

Partner

Private Client Seminar

Limerick

16 October 2019


Outline

• Service Offering

• Jim Power – Economic Update

• Case Study – Private Client

• Why did you not tell me…….

2

©2019 Grant Thornton Ireland. All rights reserved.3

Economic & Financial Update

Grant Thornton Private Client Seminar

October 2019

4

The International Context

• Global growth slowing

• Trade wars / Brexit / Political Developments

• Lack of demand in EZ

• Inflationary pressures very subdued

• Monetary policy to remain very accommodative

• Equity markets still strong > investor options limited

• More uncertain economic & political outlook than for some time

• Global growth subdued in 2020

5

US GDP (YoY)

6

-10

-8

-6

-4

-2

0

2

4

6

8

10

Q100

Q300

Q101

Q301

Q102

Q302

Q103

Q303

Q104

Q304

Q105

Q305

Q106

Q306

Q107

Q307

Q108

Q308

Q109

Q309

Q110

Q310

Q111

Q311

Q112

Q312

Q113

Q313

Q114

Q314

Q115

Q315

Q116

Q316

Q117

Q317

Q118

Q318

Q119

(%)

UK GDP (YoY)

7

-8

-6

-4

-2

0

2

4

6

Q100

Q300

Q101

Q301

Q102

Q302

Q103

Q303

Q104

Q304

Q105

Q305

Q106

Q306

Q107

Q307

Q108

Q308

Q109

Q309

Q110

Q310

Q111

Q311

Q112

Q312

Q113

Q313

Q114

Q314

Q115

Q315

Q116

Q316

Q117

Q317

Q118

Q318

Q119(%

)

Euro Zone GDP (YoY)

8

-8

-6

-4

-2

0

2

4

6

Q100

Q300

Q101

Q301

Q102

Q302

Q103

Q303

Q104

Q304

Q105

Q305

Q106

Q306

Q107

Q307

Q108

Q308

Q109

Q309

Q110

Q310

Q111

Q311

Q112

Q312

Q113

Q313

Q114

Q314

Q115

Q315

Q116

Q316

Q117

Q317

Q118

Q318

Q119(%

)

Sterling

9

0.7

0.75

0.8

0.85

0.9

0.95

01/01/2010 01/01/2011 01/01/2012 01/01/2013 01/01/2014 01/01/2015 01/01/2016 01/01/2017 01/01/2018 01/01/2019

The Irish Economy

10

• Strong Growth Recovery, but exaggerated

• Exports very strong

• Housing market moderating

• Consumer confidence fragile

• Pressure on Public Services, Public Sector Pay

• High Level of Government Debt

• Debt/GNI* 104% (Debt/GDP 64%)

• Corporation Tax Model under pressure

• Budget 2020 very tricky

Irish Growth Measures

11

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

(€m

)

Gross domestic product at current market prices Gross national product at current market prices

Modified gross national income at current market prices

Fragile Consumer Confidence

12

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Feb

-96

Sep

-96

Ap

r-9

7

No

v-9

7

Jun

-98

Jan

-99

Au

g-9

9

Mar

-00

Oct

-00

May

-01

Dec

-01

Jul-

02

Feb

-03

Sep

-03

Ap

r-0

4

No

v-0

4

Jun

-05

Jan

-06

Au

g-0

6

Mar

-07

Oct

-07

May

-08

Dec

-08

Jul-

09

Feb

-10

Sep

-10

Ap

r-1

1

No

v-1

1

Jun

-12

Jan

-13

Au

g-1

3

Mar

-14

Oct

-14

May

-15

Dec

-15

Jul-

16

Feb

-17

Sep

-17

Ap

r-1

8

No

v-1

8

Jun

-19

Moderating House Prices (% YoY) - Affordability

13

-40

-30

-20

-10

0

10

20

30

40

Jan

-06

May

-06

Sep

-06

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

May

-09

Sep

-09

Jan

-10

May

-10

Sep

-10

Jan

-11

May

-11

Sep

-11

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

May

-16

Sep

-16

Jan

-17

May

-17

Sep

-17

Jan

-18

May

-18

Sep

-18

Jan

-19

May

-19

(%)

National - all residential properties National excluding Dublin - all residential properties Dublin - all residential properties

House Completions

14

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012 2013 2014 2015 2016 2017 2018 H1 2019

Budget 2020

• 70 minutes talking about very little

• A very unexciting offering – totally appropriate in the circumstances

• Carbon Tax measures reflect political realities, not environmental concerns

• Personal tax reform off the agenda

• Assumption that Corporation Tax take will be sustained

• Expenditure still growing strongly, which is what the electorate desires

• Lots of small initiatives, but nothing of real substance

• Modestly stimulatory for economy

• A budget ‘without precedent’.

• We will just have to await Brexit

15

The Brexit Impact

• Uncertainty has taken heavy toll on UK economy, set to worsen with ‘no-deal’ Brexit

• Sterling has obvious vulnerabilities

• Auto industry & beef already hit by Brexit

• Irish confidence has been undermined – the reality could be worse

• Period of intense uncertainty, with some opportunities

16

What to Watch in 2020

• Brexit

• Global Economy

• US presidential election

• Changing of the guard & ECB & Policy making in the EU

• Irish General Election

17

18


Case Study – Discussion

John:

• Runs a successful trading company and owns all of the shares in his own name.

• Salary of €150,000 p.a. and sole income earner in house. Married to Mary with 3 children.

• Aged 53 and Mary is a year younger.

• Wishes to sell the company in 10 years, to retire and travel with Mary. Prudently valuing the company at €3 million.

• Looking to fund pensions for both, through company profits.

• Has pension benefits from a past employment.

• Salary currently covering cost of living.

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Case Study – ASPECTS

Tax:

• Retirement Relief / Entrepreneurial Relief

• Possibility of Holdco structure

• Gifting of shares / relevance of age

Financial Planning:

• Pension Planning & how to structure

• Existing benefit already attained

• Planning for future Inheritance

20


Why did you not tell me……

21


Annual gift exemption

Why use it?What is it?

22

€3,000 per year can be gifted by anyone to anyone

Post tax gift – not avoiding taxes

Does not use up any of the CAT thresholds

Simple way of reducing overall “estate” value


Income protection

Who needs it?Who has it?

23

More people in Ireland have pet insurance and gadget

insurance than income insurance (i.e. income protection)

• Employees

• Self-employed

• Company directors

Tax relief available on premiums paid!


Employment of spouse

Why not?Why do it?

24

Use up their personal threshold

“Service” aspect of length of service satisfied

Future financial planning purposes – pension funding

Divorce?


Inheritance – what is Section 72 cover?

25

Whole of life cover could be suitable if you:

• want a guaranteed protection plan for life with payments

that don’t change – unless you choose the indexation

option;

• have assets you want to protect against inheritance tax;

• want cover for the rest of your life (because cover is for your

whole life, you may pay more for this cover and must

continue to make payments even after you retire).

Whole of life cover may not be suitable if

you:

• are looking for flexible payments and the possibility to

change your cover in the future and do not need to plan for

inheritance tax;

• are looking for a plan with a cash-in value;

• want additional benefits on your plan for example, specified

illness cover;

• are looking for a plan that provides cover for a set term or to

cover your mortgage.

Whole of life cover is a death benefit policy that is designed to cover an individual or couple for an

indefinite period of time. The policy can be written under Section 72 Capital Acquisitions Tax

Consolidation Act 2003 (‘Section 72’) for inheritance tax purposes.


To PRSA or not to PRSA

LimitationsBenefits

26

Useful structure to consider when total pension fund

begins to exceed €800,000

Offers flexibility in relation to staged drawdowns

Estate planning benefits – fully payable to estate on

death

Funding limits are restricted to personal limits rather than

company limits

Can be more costly than occupational pension schemes

or personal pensions


Three types of individual – which one are

you?

27


Thank you

28

Documents

Private Client Seminar - Grant Thornton Ireland · Private Client Seminar Limerick 16 October 2019 ©2019 Grant Thornton Ireland. ... -06 May-06 -06 -07 May-07 -07 -08 May-08 -08