Let 2025 be the year you plan your future

At this time of year, many of us have great intentions of implementing positive changes in various aspects of our lives. Often our thoughts can turn to our financial wellbeing. There’s no doubt that improving our approach to financial planning if maintained, can reap long-term benefits. In this article we discuss five things to consider to help ensure your financial plan remains on course.

1. Are you getting the most out of your pension?

Making regular pension contributions can be one of the most tax-efficient ways of providing an income in retirement. So what should you consider? 

• Budget 2025 announced changes to the Standard Fund Threshold for the first time in 10 years. The change will see a phased increase in the maximum tax efficient pension from its current level of €2m to €2.8m by 2029. Now is the time to review your pension strategy so you can refresh decisions around contribution levels, investments and timing of drawdown.
• Is your current pension structure fit for purpose? There have been significant changes to rules relating to pension funding, with restrictions on company contributions to Personal Retirement Savings Accounts (PRSAs) introduced in January 2025. A master trust, which is an occupational pension scheme, is likely to become the main tax-efficient retirement savings vehicle for business owners, with self-directed master trusts allowing for more flexible investment options and broader wealth advice.
• Are you maximising your personal pension contributions? If not, you could consider increasing your pension contributions in 2025. This could be particularly beneficial if you are a marginal rate taxpayer.
• Do you have multiple pensions? Don’t lose track of your pension pots or fees incurred. A consolidated pension ensures a coherent investment strategy that is aligned with your overall retirement objectives and can be efficiently adjusted to deal with changes in markets, regulations, or your personal circumstances.  

2. Is your money working for or against you? 

In 2024, Irish households held in excess of €156bn on deposit with Irish banks. However, as has been well publicised, Irish savers are not making the most of their savings, with almost 90% of this money still resting in easy-access, low or nil interest rate demand deposit accounts. While some have taken advantage of higher interest-bearing cash alternatives such as money market funds, the interest available on these are forecast to reduce over 2025. So what are some options for your cash?

• Ensure you have easy access to some level of cash reserves. For those currently employed, we would suggest holding between three and six months of living expenses in your rainy-day fund. This should increase to six to twelve months if you have retired.  
• Holding too much cash carries risk as it will be eroded by inflation over time. This has been particularly evident in recent years. 
• For money that you will set aside for the medium or long term, growth-oriented assets will help you get better value for money and outstrip inflation. Time will be on your side to weather any market fluctuations that may occur. 

3. Plan for the best

Addressing what you need for your own lifetime and how best to pass any excess wealth can offer great peace of mind for both parents and beneficiaries alike. There are a number of considerations:

• A key component of any financial plan is to assess how much you need to meet your own lifetime needs. This can provide you with a goalpost to target if you’re still working or a decision-making anchor if you have your money made and are deciding how much and when to pass to the next generation. 
• For individuals with excess wealth, do the increases to the relevant Capital Acquisitions Tax (CAT) thresholds outlined in the Finance Act 2024 offer you an opportunity to pass on further assets tax efficiently? The relevant lifetime thresholds are now €400,000 (previously €335,000) from parent to child/step-child, €40,000 (previously €32,500) from other family members and €20,000 (previously €16,250) from anyone else. 
• Are you utilising the Small Gift Exemption? Any individual can receive an annual gift of €3,000 tax free from any number of people. Over a 15-year period, a couple could gift up to €90,000 to a child or grandchild without impacting their CAT threshold.
• For larger amounts, how can this wealth grow in your children’s names to reduce their inheritance bill down the road? Lending is commonly used in this regard, while a family partnership can be an effective structure, if maintaining control is important.

4. Plan for the worst

Death is one of life’s certainties. Ensuring your dependents are financially secure after your passing can bring peace of mind. 

Key considerations include: 

• Have you a will in place and is it up to date? In the absence of a will, your estate will pass under the rules of intestacy which could have unintended consequences.  
• Do you have the right insurance coverage in place? Whether this involves extending your life cover into retirement, safeguarding business interests, or specific life policies to address inheritance taxes.
• A practical issue to consider is how to fund your family’s future inheritance tax liabilities. This issue is particularly relevant for illiquid assets such as property or shares in a private company. A Section 72 policy can provide a solution. This is a specific type of life assurance policy, the proceeds of which are exempt from CAT provided the proceeds are used to pay the beneficiaries’ CAT liabilities. The earlier these policies are put in place, the better value they will be.

5. Do you have a financial plan or is your financial plan up-to-date?

At Davy, financial planning is a core component of our client offering. Our approach spans across the entire wealth management spectrum including pensions, tax, structuring, succession, philanthropy, protection and investments.

A personalised financial plan will take into account you, your family’s and your business’s objective and will set out the most appropriate advice for your specific circumstances. We understand that things change as life goes on and our financial plans are designed to evolve as you do. Your Davy adviser will work with a team of tax and pension specialists to create a bespoke financial plan with measurable goals and action points.

Let us help you on your financial planning journey.