Wednesday, 19 June 2019 11:03

Financial Planning advice for Project Managers or Business Consultants who have recently set up their own business.

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Financial Planning advice for Project Managers or Business Consultants who have recently set up their own business.

  • Income Protection
  • Death in Service Life cover
  • Pension planning for business owners

Have you recently left a job with an employer and you are now setting up your own business as a Project Manager or Business consultant?

We would like to offer some simple financial advice and tips.

Most Project Managers and Business Consultants usually set themselves up through a Limited Company structure. Our experience in dealing with a number of Project Managers and Business Consultants is that they have usually left a high-profile position in a medium to large company with a really good salary and had very attractive employee benefits like Pension, Death in Service life cover, Income Protection and Health Insurance cover.

If you have secured a really good Consultancy Contract, we would recommend the following;

The importance of Income Protection cover  

The first piece of financial advice is we recommend that you look to protect your income with an Income protection policy. Our experience to date dealing with a number of Projects Managers and Business Consultants is that for the first year you are not yet clear as to how much income to drawdown from your own business.

Income Protection would normally be automatically provided if you were previously employed in a large company and the level of cover is usually 75% less social welfare entitlements. So once you leave your previous employment these benefits stop and it is important that you look to put them in place yourself.

Remember if you set up your own business either as a Limited Company or as a Sole Trader you are not entitled to any Social Welfare Disability benefit, if you cannot work there is no State benefit for you, this is another important reason why you should take out this cover.

We recommend that you put in place some level of cover on yourself and this cover can be increased once you are clearer on the level of drawing from your business.

The Friends First Income Protection plan will automatically offer a 20% increase in cover every 3 years.

The type of cover is particularly important for anyone who has a family or mortgage and other financial commitments. The cover will protect your income in the event of you being unable to work as a result an accident, illness, injury or disability.

The maximum level of cover you can take out is up to 75% of your declared earnings, so for example if you are drawing €80,000 per annum from your business then you can cover up to 75% or €60,000.  

The cost of the cover can be paid by the business and is a tax write off.

How much does this cover cost?

The cost of the cover depends on the following;

  • The amount of cover you require
  • Your age
  • Ceasing age of your cover e.g: generally, from age 55 to age 70
  • Any previous medical issues
  • For example  

    The cost for a year 40-year-old non-smoker providing an income of €1,000 per week or €52,000 per annum to age 65 with a deferred period of 13 weeks [3 months] is €140.94 per month

    An income protection policy is one of the most important policies you will ever effect as it will protect your livelihood in the event of a long-term illness or disability.

    The cover is easy to provide, you will need to complete an application form which requires details on your medical history along with some personal details.

    In some instances, depending on the level of cover you require, the company providing the Income Protection cover will write to your Gp and may request you to attend for a medical examination.

    There are 3 main companies that provide Income Protection, Aviva/Friends First, New Ireland and Irish Life.

    Aviva/Friends First are the market leaders in providing this cover.

    Death in Service life cover

    This is another important type of cover for newly established business owners to consider, especially if they have left employment where this cover was automatically provided as part of their employee benefits.

    This type of cover would be very important for anyone who has a family and dependants and is looking to put in place a similar level of cover as to what they had in their previous employment. 

    For any newly established owner once you have decided on the level of your drawing from your business you can take out Death in Service life cover of up to 8 times your gross earnings.

    In the event of death, 4 times your current gross earnings are paid tax free to your next of kin and the balance is paid by way of a pension or annuity for life.

    The cost of the cover is a tax write off for your business.

    So, for life cover of €500,000 to age 65 for a 40-year-old non-smoker the cost is €55.76 per month. As you can see the cost of the cover is not expensive.

    If your earnings increase you can increase the cover by talking out a new policy to bridge the gap.

    The cover is simple to arrange, you will need to complete an application form which will include details of your medical history, the life company you are applying to may request medical information from your GP and for higher amounts of life cover they may require you to attend for a medical examination.

    Pension Planning for Business Owners

    As you may have only recently set up your own business most people wait until at least 6 months before deciding what they wish to do in relation to starting a pension. Once they start seeing their income build up in their business bank account, they you can make more definite decisions re pension planning.

    If you are set up as a Limited Company, there is lots of scope to fund into your pension as against as a Sole Trader where you are restricted to the amount that you can invest by way of your age and earnings.

    We would generally see that business owners would set up a monthly pension contribution and depending on the year end profit projection they would make a once off pension contribution, this has the effect of reducing your Company Corporation tax liability.

    Once the company starts building up profits, we generally see business owners increase their monthly pension and also the amount that they invest into a pension at their year-end.

    For a business owner who has not made a pension contribution for a number of years they can then make a larger once off pension contribution which can make up for the years that they did not fund, this figure can be calculated and we just need information re the number of years in the current company service and current earnings and based on this we calculate a maximum amount that can be invested.

    As you can imagine there are a very wide range of pension fund options to choose from and it is important to deal with a Financial Broker who can advise on a wide range of these options. 

    For more information contact Colm Kelly of Cregan Kelly O’Brien Financial Planning

    Cregan Kelly O’Brien Financial Planning are regulated by the Central Bank of Ireland

    Phone 01 8700370


    Last modified on Wednesday, 19 June 2019 09:06
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    About Cregan Kelly O'Brien


    In 2007 Maurice Cregan and Colm Kelly established CK Financial Services to provide independent financial planning and advice to business owners and individuals. Tommy O'Brien, a General Insurance expert, then joined them in 2010, enabling them to meet the full financial needs of their clients. Financial Life & Planning Limited would deliver Financial Services, and O'Brien Cregan Kelly Insurances would deliver Insurance Broking services. Two Business Names were registered Cregan Kelly O'Brien Financial Planning and Cregan Kelly O'Brien Insurances

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