Turning Company Profits into Personal Wealth

Turning Company Profits into Personal Wealth

Executive Pension arrangements are perhaps the most tax efficient way of providing pension benefits for Company Directors, key employees, and family members employed in the business.


If your business is doing well and generating healthy profits, now may be the time to start extracting it from your business!


As a Company Director or spouse employed in the business, one of the most attractive and tax-efficient ways to extract profits from the company and turn them into personal long-term wealth is by way of transferring those profits into a company pension.


Where the company has excess profits which the company directors wish to transfer into a company pension, it is often more tax efficient for the employer to make an employer pension contribution to an Executive Pension. The advantage here is to avoid a personal tax liability for the member which would be the case when using other profit extraction methods such as increasing salary/bonuses or taking share dividends.


Conventional extraction methods will cost you more:

You may decide to take profits from your company in the more conventional ways, but these will just leave you paying more tax:


  1. If you take it by way of salary, you may have to pay income tax at up to 40%, USC up to 8% and PRSI up to 4%.
  2. If you take it as dividends, you would pay tax at up to 40%.
  3. If you use the money to buy a car for yourself, you pay Benefit in Kind at up to 30%.
  4. If you sell your company, you pay Capital Gains Tax at 33%.
  5. In the event of death, Capital Acquisitions Tax at up to 33% applies.

Therefore, by transferring your profits into a Company/Executive Pension you can reduce the above forms of personal tax liability.



Tax Advantages of a Company Pension Scheme



Transfer Profits into Pension | How does Max Funding work?


Employer contributions are not restricted by age related limits unlike member/employee contributions, but instead are related to the cost of providing retirement benefits based on “two thirds” of salary (where there is at least 10 years service at retirement). This can result in very generous contribution amounts.


Contributions are allowable as either Ordinary Annual Contribution or Special Contributions. The maximum allowable ordinary annual contributions to a scheme include all Employer, Employee and Additional Voluntary Contributions (AVC’s) made to the scheme in the company accounting period.


It is worth noting that it is possible to pay an Ordinary Annual Contribution by either regular monthly, quarterly or annual payment or by way of single premium. Special Contributions are normally paid by single premium and can be used to backdate periods of salaried service which were previously not pensioned.


The below information is needed to calculate the maximum contribution that would benefit you on a tax efficient basis when funded by the company:


  1. Age
  2. Salary
  3. Gender
  4. Marital status
  5. Chosen retirement age
  6. Date that salaried service commenced & potential service
  7. Value of pension benefits relating to previous & current employments



Ordinary Annual Contribution Calculation


Emma is 35 and married and has a salary of €50,000. She has a Personal Pension currently valued at €100,000. She has no definitive plan for a retirement date but wants to maximize pension contributions now to the best arrangement available.


The Revenue limits around personal contributions mean that the maximum personal contribution she could make to a pension would be €10,000 (20% x €50,000).


However in Emma’s case, her salary comes from her company. As a result the company itself can make contributions to an Executive Pension arrangement on Emma’s behalf.


Turning Company Profits into Personal Wealth


As you can see the company can make a far greater contribution on Emma’s behalf than Emma could make personally under the personal age related limits. For the purpose of the calculation we have assumed Emma’s NRA to be age 60 as she has no specified retirement date and wishes to maximize contributions.



Special Contribution Calculation


There is also the potential for companies to make pension contributions on behalf of employees for previously unfunded service with the company. These contributions are known as Special Contributions.


James is 50 and has his own company from which he takes a salary of €40,000. James set up his company fifteen years ago, taking a salary for each of these years but has no previous pension funding in place. James wishes to retire at age 60.


Turning Company Profits into Personal Wealth


As you can see the company can make a far greater contribution on James’s behalf in respect of previous service than James could make personally under the age related limits. The employer could immediately make a very large Special Contribution for James from the outset.


Revenue limits around personal pension contributions does allow backdating where prior to the 31st October in the current year, James could make a contribution and offset against last years income tax bill but limited to age and earnings attained in the previous year. Assuming earnings were the same this would equate to 25% of €40,000 or €10,000.


However, Revenue also allows that contributions may be made in respect of previous service by an employer using an Executive Pension arrangement. The calculation is based on the member’s current salary and all previous years with the company where they took a salary. This can be particularly beneficial for late starters to pension funding.



Tax Relief through Employer Contributions


Tax relief may always be attained on Ordinary Annual Contributions in the year in which they are made. Tax Relief on Special Contributions can also always be attained in the year in which the contribution is made where the Special Contribution is equal to or less than the corresponding ordinary Annual Contribution made in the same year.


A huge plus is that those who invest in a company pension plan enjoy benefits such as:

  1. No Benefit-in-kind on employer contributions.
  2. Immediate income tax relief on AVCs and employee contributions deducted from salary.
  3. Corporation tax relief on employer contributions in the year the contribution is made at the rate of corporation tax which is currently 12.5%.
  4. No employer PRSI is paid on employer pension contributions to an occupational pension scheme.

There are further tax advantages as any contribution made is invested in a pension fund which enjoys tax-free investment growth with no DIRT, Exit Tax or Capital Gains Tax applicable to any investment return achieved by the contribution.



Retirement Relief


At retirement, Directors will be entitled to a Retirement Lump Sum, some or all of which may be tax free.

The balance of the fund can then be used to:


  1. Purchase an annuity which will provide a guaranteed pension income for life.
  2. Invest into an Approved Retirement Fund (ARF).
  3. Take as taxed cash, subject to certain restrictions.

Pension income in retirement and withdrawals from ARFs are subject to income tax, Universal Social Charge (USC) and PRSI (if applicable).



How do I get started?

Contact us for Financial Advice


The rules governing overall contributions to Executive Pensions can be complex.

We recommend that you seek advice from one of our Financial Advisors first to make sure the company pension is set up correctly, and to maximize the overall contributions and tax-efficiency.


Need some assistance?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.


Pension Auto-Enrolment

What is Pension Auto-Enrolment?


Pension Auto-Enrolment (AE) is a new savings and investment scheme for employees where financial returns are paid out to participants on retirement, in addition to the State Pension. It is being set up as not enough people have occupational or supplementary pension coverage to help maintain a reasonable standard of living in retirement above the level of the State Pension.


The proposed Irish Auto-enrolment system is designed to simplify the pensions decision for workers and make it easier for employers to offer a workplace pension. According to the Central Statistics Office’s Pension Coverage Survey 2021, the rate of supplementary pension coverage is around 66% of Ireland’s working population (outside of the State pension), and this could be as low as 35% in the private sector.


How will the Auto-Enrolment system work?


The auto-enrolment system is scheduled to go live from 1 January 2024, and will apply to approximately 750,000 employees who are aged between 23 and 60, earning over €20,000 across employments, and who are not already enrolled in an occupational pension scheme. Eligible employees will be automatically enrolled in the scheme but will have the choice after six months of participation to ‘opt-out’ or suspend participation. Those who opt out will be automatically re-enrolled after two years.


The Government as the new Central Processing Authority (CPA) will be responsible for, amongst other things, contribution collection, compliance, the allocation of pooled contributions to registered providers (RPs), the allocation of pooled investment returns to participants, and the overall administration of the auto-enrolment system.


How much will it cost?


The level of required auto-enrolment contributions will be gradually phased in over a decade. Contributions will be paid by employees, and matched by their employers with both employer and employee contributions starting at 1.5% of Gross Earnings and increasing every three years by 1.5% until they eventually reach 6% by Year 10 (2034). The State will top-up the rest. When allowance is made for the proposed Government top-up, this will lead to a total contribution being paid to a member’s pension account of 14% of Gross Earnings from 2034 (6% employee, 6% employer, 2% Government top-up).


The rates and time-frame are summarised as per below:


Phased Contributions


Employer contributions and the State top-up will be capped at a maximum €80,000 of an employee’s gross salary. Employees may contribute on earnings greater than €80,000 if they wish.


What the State Tax Incentive offers


Under the proposed auto-enrolment system the Government plans to operate a new incentive system to encourage pension savings by topping up member contributions. As outlined above the Government will contribute €1 for every €3 of member contributions.


Auto-enrolment will not replace tax relief available for private supplementary pensions. The Government has confirmed that the new system will run alongside the existing tax relief system available to pension savers participating in occupational pension schemes, PRSA and Personal pension products whereby individuals receive marginal income tax relief at either 20% or 40% (up to certain contribution limits) on their pension contributions.


The cost per €1 to member summarised below:


State Contribution under Auto-Enrolment



Investment Fund Options


The CPA will assign four commercial investment companies to become Registered Providers (RP’s) for the CPA. The role of the RP’s will be to provide investment options and act as investment managers for auto-enrolment contributions. They will invest contributions on behalf of individual participants and will be required to offer four fund types: 1. Conservative, 2. Moderate risk, 3. Higher risk, and 4. Default (The default option is required for people who do not nominate a preferred fund type and is a key element in a successful auto-enrolment system).


Should I wait for Auto-Enrolment?


Auto-enrolment is seen as a viable solution to address the lower pension coverage in Ireland, and could encourage people to be more financially aware of the importance of saving for their retirement. Although a positive move by government, there are many reasons why you should not wait for auto-enrolment and consider setting up a pension scheme for yourself and/or your employees now.


As outlined above, the auto-enrolment state tax incentives are less generous than the current tax relief incentives available for higher rate taxpayers.

Here’s why you should consider setting up your own Private Pension now:


  1. With a Private Pension, you can get up to 40% tax relief on your personal contributions now. For example, under existing rules if you contribute €1,000pm, and are on the higher rate of income tax, then you will receive tax relief of €400pm, meaning that your contributions of €1,000pm will only cost you €600pm. Under auto-enrolment the State will pay €1 to every €3 saved i.e. your contribution would be €667pm and the State’s contributions is €333pm. Please note that limits apply to the above.
  2. There is a wide range of excellent performing funds of different risk levels across the various pension providers, however, under the current auto-enrolment proposal, there is only a choice of 4 funds to choose from which can potentially limit your pension growth and flexibility.
  3. Auto-enrolment presents a risk that individuals will take a backseat and leave their contributions at the minimum contribution level which may not be adequate to sustain their current or desired lifestyle in retirement.


In order to secure your financial future, starting a pension is one of the smartest financial decisions you can make. When choosing a pension, having all the information you need is key.


Therefore, sound advice by a Qualified Financial Advisor is invaluable. Our Advisors can guide you through the process and help you select the right plan for your circumstances.


All of us have different goals for our retirement and this is why it would make sense to take personal control of your pension and retirement planning – to have access to all of the investment options available to you alongside a tailored strategy to help you get there.


Need some assistance?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.


The AMRF is no more! How will this impact me?

The Finance Bill 2021 introduces changes to Pension rules


The Finance Bill 2021 was signed into law in December 2021. It introduced a number of significant changes to pension rules, including the removal of the AMRF (Approved Minimum Retirement Fund). These changes were based on some of the recommendations detailed in the report produced by the Inter-Departmental Pensions Reform & Taxation Group (IDPRTG).


There are both positive and negative potential implications to come from these changes for clients who are retiring or who have already retired, as will be discussed below…

In general, however, we welcome these changes as the associated restrictions on AMRFs were regarded by many as no longer fit for purpose.


What was an AMRF?


Previously, before an individual could take out an ARF (Approved Retirement Fund), up to €63,500 of their fund would have been needed to purchase an Approved Minimum Retirement Fund or AMRF. At age 75 the AMRF would then be converted into an ARF. If the person had a guaranteed income of over €12,700 per annum including the state pension then an AMRF was not required. 


The purpose of the AMRF was to help pensioners secure their income throughout retirement by protecting them from drawing too much income from their pension funds, if they had a guaranteed pension income less than €12,700 a year.


What has changed?


1. The AMRF requirement will no longer apply at retirement  if you are looking to avail of the Approved Retirement Fund (ARF) option from Occupational Pension Schemes, Personal Pensions (Retirement Annuity Contracts), Personal Retirement Savings Accounts (PRSA’s), and Personal Retirement Bonds.


2. Legislative rules and conditions applying to AMRFs were repealed with effect from 1 January 2022 – and Fund Managers cannot accept any assets into an AMRF after 1 January 2022.


The AMRF requirement will longer apply at Retirement if you are looking to avail of the Appr

At retirement, you will no longer need to meet the following requirements:


  1. Have a guaranteed pension income of €12,700 a year.
  2. Invest €63,500 into an AMRF.
  3. Keep €63,500 as a restricted fund in a vested PRSA.
  4. Use €63,500 to purchase an annuity (pension income for life


Additional changes made, as follows:


  1. The death in service options available from company pension plans have been expanded to allow for the deceased’s spouse to invest in an ARF as an alternative to a spouse’s annuity.
  2. The restriction which prevented those in company pensions with their employer for more than 15 years from transferring to a PRSA has been removed. Other requirements still apply when transferring to a PRSA.


I have an AMRF, how will this impact me?


The changes will impact many clients who held AMRF policies – for example those who, until now, did not satisfy the guaranteed income requirement (€12,700) and/or those who due to their age (under 66) meant that they were not yet in receipt of state pensions.


It will also impact, in some cases, those who had reached state pension age but did not receive the maximum rate of state pension and meet the threshold of €12,700 – for example, due to gaps in their Pay Related Social Insurance (PRSI) record.


On 1 January 2022 your existing AMRF plan automatically became an ARF, and the legislative rules applying to ARFs now apply to these former AMRFs.


I have a vested PRSA restricted fund, how will this impact me?


What is a vested PRSA?

It is a PRSA where the Retirement Lump Sum has been paid out and the residual fund remains in the PRSA rather than transferred to an AMRF. 


The above changes to AMRFs also apply to vested PRSAs:

The restricted fund requirement is now removed from your vested PRSA.  This change will give you greater flexibility regarding your withdrawal options.


Options at Retirement


The requirement to purchase an AMRF for those without a guaranteed income of €12,700 has now been removed.

As a result, should you choose the “ARF Option” for your residual fund, you can now allocate the entire residual fund (after the Retirement Lump Sum is paid) to your ARF – or to a number of separate ARF policies – or to a combination of ARF and/or Annuity.

You may also take the residual fund as a once-off taxable cash payment.


Withdrawals from ARFs:

Withdrawals from ARFs


Prior to 1 January 2022, the maximum withdrawal that was allowed from an AMRF was 4% per annum. Given the recent changes, if you previously held an AMRF policy, you may be tempted to take large withdrawals or fully encash the policy.


This may be essential in cases of illness or financial hardship, but be advised that significant withdrawals or full encashments may result in early surrender penalties and will likely be taxed at your marginal rate of income tax, USC, and PRSI (where applicable).


When a full encashment is made in any given year, this could result in a higher tax on those funds when compared with taxation where the funds are withdrawn on a gradual or phased basis over a number of years.




  1. The removal of AMRFs now allow for simplified post retirement options.
  2. This will give more flexibility in accessing your pension fund, and your withdrawal options.


A Caution:


  1. The requirement to draw an annual income from your entire pension may may have implications on the expected longevity of the fund in retirement. Here, consideration should be given for the investment decisions made in relation to your income requirements.


Impartial Financial Advice


Contact us for Financial Advice

You may have additional options and possibilities as a result of the changeover from AMRF to ARF.


For advice in understanding your available options, speak to our Financial Advisors who will be able to guide you appropriately.


Need some assistance?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.

Day Trading or Long Term Investing?


As Financial Advisors we deal with a broad range of clients on an ongoing periodic basis who have various objectives and goals. Since the COVID-19 outbreak we have seen a meteoric rise in younger clients asking us for advice on whether they should go about Day Trading or Long Term Investing. Clients whose age demographic aren’t usually in tune with the financial world are becoming more and more interested in beginning their investment journey.


This is brilliant, as we all know, investing early and putting money away at a young age is the single greatest step you can take on your journey to a financially successful future. Taking advantage of compounding interest effects, long term investment horizons and reduced spending habits have caused a tidal wave of change.


Rise of the Day Traders


Online trading apps and platforms which we have all come to know, have helped increase the appetite for expediency among the younger generations. Slick interfaces, low charging structures and quick account setup times have opened the markets up to many. On the face of it, this is great, undoubtedly so.



The introduction of a new generation of investors into the marketplace now can reap all the rewards investing has to offer. Only the fact remains that many investors entering the investment landscape have done so with little to no previous experience. One key change is happening, many investors are interpreting “long-term investing” as “day-trading”. Day-trading should not be confused with long-term investing.


Day trading, as the name suggests, involves frequent buying and selling of stocks or investments on the same day. When the market opens, so begins the buying and selling. When the price of a stock changes to a point that is deemed favorable, the trader can make a profit, sometimes small, sometimes substantial depending on the stock and market price.



  1. Quick to set up an account, and low charging structures (depending on the platform).
  2. Little capital (money) required to maintain a daily account balance to trade.
  3. Significant gains can be made with the right trades over a short period of time.
  4. Disciplined and dedicated investors can be highly successful with the right financial analysis tools and a good understanding of how the markets work.



  1. More capital (money) required for those who wish to trade more frequently throughout the day.
  2. Hefty fees or commission may be deducted from profit made from each trade, sometimes costing you more.
  3. Trading most often requires a lot of time and attention, at least two hours each day. For the serious traders, around five hours each day.
  4. Running the risk of over-trading and doubling down on potential losing trades.


Long Term Investing


Long-term investing is known as the more prudent approach for investors. This method involves the buying and selling of investments over a period of years, usually longer than three to five years. Here, the investor will approach an investment company and sit down with a Financial Advisor to have a conversation about his or her plans for the future and what goals they aim to achieve in the long term. Why is this regarded the more prudent approach?

Long-term Investing


Its about planning for the bigger picture. A Long-term investor will often use this route with the intention to realize sustainable returns over a period of time and will rely on professional fund managers to actively monitor and manage the stocks on your behalf (at a reasonable charge).


The Advisor will take into consideration the investor’s personal and financial circumstances, assess and calculate the investment time horizon (term) and the level of investment risk he/she is prepared to take and that is required, and based on these factors, put together suitable investment solutions to achieve the investor’s goals or objectives. 


  1. Option to invest a small amount regularly (monthly), or a larger one off investment.
  2. Asset class diversification to effectively manage investment risk (Equities, Bonds, Property, etc).
  3. Commission and charges are disclosed upfront and transparent to the investor. Financial Advisor fees can be negotiated.
  4. Suitable for investors who wish to invest long term and to achieve future financial goals.
  5. The outcome of staying disciplined and invested in the market over time (riding the waves of short-term volatility) has historically delivered positive and consistent “compounding” returns, with the investor always coming out on top.


  1. Financial Advisor fees, fund management charge, fund switches and trading costs apply (usually offset by fund performance over time).
  2. Not suitable for impatient investors who are looking for immediate returns.
  3. Historically, markets have been impacted by periods of downturns (capital at risk). Investors can make the mistake of selling out of the market, locking in investment losses.


What route should I take?


The key difference between day-trading and long-term investing is that one requires skill and attention, and the other simply requires patience. It really depends on your personal investment objectives, the amount of capital you have, your attitude to risk, and how much time you wish to dedicate to it. Many investors choose one or the other, some choose to incorporate both methods as an investment strategy. Its important to consider that you should never risk what you cant afford to lose. This is why it is recommended to assess your attitude to risk, and match the appropriate investments to your personal risk profile.


We therefore urge anyone who plans to focus their sole investment and retirement strategy on an online trading platform to do the proper research and due diligence that such an undertaking demands from you. If done right, this can provide great results. 

Contact us for Financial Advice


Whether you plan to incorporate trading in a personal capacity with other investment strategies or plan to go it alone it is always worthwhile receiving impartial financial advice first.


Chat to the team at Smart Financial today!


      Drop us a call here   


Or leave your details below and we will get in touch with you…


Is it worth having a Pension?


We’ve often heard expressions along the lines of: “why save money for later” or “investing in pensions is gambling”. While these represent the thinking of a certain portion of the population it is important to understand that by putting a away a certain amount each month you can make your money work smarter, faster and go much further allowing you to live the life you want in retirement. In the following, we point out four reasons why you SHOULD bother with a pension…


1. Tax Relief on Pension Contributions


The state doesn’t want to be responsible for you when you’re going on month long cruises around the Mediterranean in retirement, therefore they allow any payments towards your pension plan to offset your income tax bill. The maximum percentage of your income you can claim relief on, depends upon your age (Click here for an illustration). And the contributions you make benefit from the THREE tax breaks:


  1. You can claim tax relief on contributions at your higher tax rate (20 or 40%).
  2. No tax on investments growth within you pension fund.
  3. When you want to retire you can then take 25% of your final sum tax free & up to 4% per annum thereafter to fund your income post retirement.


The closer you are to retirement age, the greater the percentage of your income you can contribute. If managed correctly you can fund, receive a retirement income and earn investment growth all tax free. This underpins the importance of receiving good advice when managing your pension!


2. Choose When To Retire!


Currently the qualifying age for the Irish state pension is 66 years old. This will inevitably increase with time due to the ageing Irish population & increases in longevity. If you do wish to retire earlier or would maybe just like to have the option to do so in the future, funding a private pension is the way forward. Maybe you would like to take a step back from work in your early sixties but keep your toes in your work for much longer. By funding a private pension and sticking to the plan, this can become a reality.



3. You need Income in Retirement


People often forget that your income is your most important asset! Pre-retirement, a decent portion of your disposable income (money left over each month after your fixed expenses) will likely be going towards the things you enjoy doing on the weekend, or a going for a quick trip across the pond every now and then. Then all of a sudden you realize you have more wrinkles than you ever remember having, you have left your employer for good, retirement has snuck up on you without having planned how and where you will receive the same level of income that has supported you throughout the many years. To plan for retirement you will need to know where your income will come from.


€248.30 per week or €12,911.60 per year is what the Irish government is giving to retirees in 2021 to do with as they please. If you were used to a much higher income & would like to still go out to your favourite fancy restaurant at the weekends (Covid Depending), you will need to have another source of retirement income. For most people, a private pension plan is the way how. Revenue limits on your pension income allows for up to 4% per year tax free to be drawn down which will help supplement your state pension.

This handy Pension Calculator will show you how much you need to start saving NOW to receive your preferred income in retirement.


Did someone say Retirement Plan? A good place to start planning is to look at your current monthly income (after tax) and ask yourself what ideal amount you would like to receive on a monthly basis in retirement to maintain your preferred lifestyle.


This handy Pension Calculator will show you how much you need to start saving NOW to receive your preferred income in retirement. Next, contact your Financial Advisor (right here if you don’t have one), simply discuss your current financial situation, and a solution that best suits your retirement goals and he or she will regularly check in with you to ensure that you are maintaining them.


4. We’re all living longer – Irish people especially!


Nowadays, people are leading more active lives in retirement. Living longer certainly sounds appealing as it gives us more time to accomplish our goals in life like visiting the places we’ve always wanted to and enjoying our everyday hobbies. Although positive, this also brings with it the challenge of having enough financial resources to see it through.


According to the 2019 Key Health trends published by the department of Health in Ireland, over the past decade we have added 3 months per year to our life expectancy with the overall mortality rate having reduce by 10.5% since 2009. This shoots Ireland above the EU average as living longer than our European neighbors. Life expectancy on average will now see men living to 78 and women to age 83. Long term care is an expensive business for the elderly, and so by planning now for sufficient income in retirement will ensure that you don’t have to be a financial burden on your family.


So where to from here?

Which pension option is best suited for me?


The earlier you start contributing to your Pension, the better off you will be in retirement! Most people find that paying into a pension is not the highest priority. And that makes total sense given that more important financial obligations come first such as mortgage or rent bills, insurance premiums, other loans to pay off, and not to mentioned putting food on the table at the end of the day.


However, after these mandatory expenses and if you have a few quid left over each month, consider regularly putting some away into your own private pension. You will thank yourself later in life! 


The best option for you depends on your personal circumstances.

If you need guidance on how prepare for the retirement YOU want, the best place to start is to seek advice from a Qualified Financial Advisor.


      Drop us a call here   



Need some assistance?

Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.

Green Investing


In a world that is constantly looking at new ways to live sustainably and people choosing environmentally friendly alternatives over previous norms, it is only right that the investing world should follow. Green investing is a form of socially responsible investing where companies make investment decisions that support environmentally friendly practices.


Driving ethical change


Newly introduced EU regulations regarding ESG (Environmental, Social & Governance) Investing recently came into effect. These aim to standardize the reporting of ESG investment funds and puts a greater emphasis on them as an overall investment strategy. This EU-wide classification system gives greater clarity to socially aware investors who are looking to put their money to work in funds which are not ethically compromised.


These new regulations also contribute toward achieving EU’s climate goals including the EU ‘net-zero 50’ target with a focus on climate change, and using technology to transform the mindset of industries towards transitioning to a low-carbon economy.


Incentive for Green Investing


We not only now see pressure from EU regulators, institutions, and society to drive environmentally responsible investing, but also by Pension fund trustees and millennial’s who want to see their investments grow with a low carbon footprint. Once being seen as too expensive and little proof of out-performance over their counterparts, this has now started to change. Millennial’s in particular who’s objective is to invest for the future and achieve long term capital growth can now look to do so through a range of ethically screened stocks.


The incentive to invest in ESG funds do not just appeal to investors from a sustainable point of view. Studies show they have also outperformed their non-ESG peers over the past 10 years. In a study conducted by Morningstar (one of the worlds most trusted data providers), closer to six out of ten sustainable funds have delivered better returns than traditional funds over the last decade. They also examined the long-term performance of 745 Europe-based sustainable funds that showed their performance were also higher over one, three, five, and ten year periods.


The Covid-19 market sell-off also proved that sustainable funds perform better than traditional funds in time of economic crisis and unusual market conditions. With the recent coinciding of the oil market collapse and the double blow by the Covid-19 pandemic, this was seen as a good example of the above as was assisted by the structural decline in the market for fossil-fuels and energy stocks. An additional driving force behind this is the decarbonization approach by many countries as well as technological changes to make renewable energy a preferred option going forward.


Having little exposure to the above-mentioned energy-based stocks has only added to the extreme popularity that ESG funds have enjoyed recently.


How can I start investing in ESG Funds?


Investment firms like Cantor Fitzgerald have long been driving the change for ethical investing. With the launch of their ‘Green Effects Fund’ back in 2000, it is now the largest ethical fund in the Irish market. The objective of these green funds is to invest across a broad base of socially responsible sectors such as recycling, waste management, wind energy, forestry and water-related businesses in a wide range of companies with a commitment to either supporting the environment or demonstrating a strong corporate responsibility ethos.





Contact us for Financial Advice


In light of all of the above, there has understandingly been a much greater emphasis put on providing more choice and a greater range of green investment opportunities to individual investors.


As new investment funds, ETFs and structured products are all getting in on the game it can be hard to search through the noise and find a suitable solution.


If you would like to find out more on Green (ESG) investing, chat to one of our advisors at Smart Financial today!


      Drop us a call here      


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