Brian McEnry, Partner, Corporate Finance & Recovery Team, BDO
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Primary Care Centre & Your Pension
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Brian McEnry, Partner, Corporate Finance & Recovery Team, BDO
- 1. Primary Care Centre & Your Pension National Primary Care Conference Investnet Healthcare Brian McEnery 14 November 2012
- 2. Current Pension Arrangements - GMS Mercer Administered – HSE contribution of 10%. GP Contribution – 5% The GP’s contribution can also be put into the Mercer Scheme or alternatively a self directed pension fund PRSA – significant flexibility with a PRSA National Primary Care Conference Page 2
- 3. Financial Implications of PCC’s • Typical cost say of say €6 million to develop • LTV of 75 per cent of development cost • Equity gap of 25 per cent or €1.5 million • Very difficult to fill the equity gap • Even if the other factors are favourable e.g. HSE rent, pharmacy income etc • Even more difficult to secure development finance • So can you use your pension to fill the equity gap in your PCC • The answer is a categorical NO • Is that the end of PCC’s and pensions? National Primary Care Conference Page 3
- 4. Pension investment possibilities - PRSA What you can’t do: •Self investing is not allowed – has to be at “arm’s length basis” •Investing in “pride in possession assets” is not allowed •So you can’t use your pension to invest in your PCC to fill the equity gap What you can do: •But it is possible to invest in a Unit Trust and have that invest in a PCC with a bank loan (as leverage) and invest in a 3rd party PCC. Possibly other doctors PRSA’s could be the owner of your PCC. •So in fact it is possible to have a broadly spread Unit Trust that is a fund which receives many GP PRSA investments and then leverages and owns a number of PCC’s including those GP’s who have invested. •This is the best mode of how GP’s can use their pension to own shares in a Unit Trust which owns the PCC as its assets National Primary Care Conference Page 4
- 5. Tax Relief on Pension Investment 1.The amount of tax relief is limited Age % of NRE eligible for based upon ones NRE and their age tax relief Under 30 15% 2.The “earnings ceiling” is €115,000 p.a. and this is the maximum 30 – 39 20% 3.Contributions can be made monthly, 40 – 49 25% or annually through AVC’s 50 – 54 30% 55 - 60 35% Over 60 40% National Primary Care Conference Page 5
- 6. The GP’s Pension Scheme Defined Contribution Scheme based upon GP’s income from the HSE (medical card patients) •If a GP is 51 years old the maximum contribution is €34,500 •Over a period of time this fund combined with their colleagues can be used to indirectly fund the development of PCC’s •Clearly the PCC can’t be overleveraged or they can get into financial difficulty •Need to base ability to repay based on conservative income, and •Stress tested interest rates •GP’s collectively using their personal pensions to deleverage PCC’s is good financial planning and a means of rolling out investment in the sector National Primary Care Conference Page 6
- 7. Other Pension Options • Say your spouse is a practice manager • Consequently an employee of yours • You can establish a spousal executive pension scheme • Make pension contribution of say €30,000 – so long as it is wholly and exclusively for the purposes of the trade • The pension contribution is a Case II expense for you saving 55% • Her fund can invest in the Unit Trust • This again can be used leverage and own a PCC investment National Primary Care Conference Page 7
- 8. BDO Healthcare Consulting Brian McEnery Corporate Finance Partner Tel: +353 1 4700460 E: bmcenery@bdo.ie Evin McLoughlin Consulting Partner Tel: +353 1 4700354 E: emcloughlin@bdo.ie David Giles Tax Planning Partner Tel: +353 1 4700271 E: dgiles@bdo.ie National Primary Care Conference Page 8
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