A new client recently approached us to discuss his existing Executive Pension Plan (EPP). Taken out through another broker some 10 years previous, he was now been told of the legislative requirement to move it to a Master Trust EPP, or to a PRSA by April 2026, as a result of the IORP II Directive.
At first, he was happy to be told that his annual management charge (AMC) was not going to increase, as he had already established a considerable fund and he was continuing to invest sizeable monthly amounts.
His AMC charge was 1.25% PA (a typical charge) being levied against his accumulating pot, made up of monthly contributions, as well as occasional lump sum injections.
However, he still took this opportunity to shop around to make sure that he was doing well from both a charges and performance perspective. Now aged in his late forty’s, he was already planning to increase his regular monthly contributions, with a view to retiring at age 60.
On review, the results we offered meant a substantial 4-fold improvement:
- With a higher level of support, we reduced his AMC to just 0.75%, by moving his accumulated fund to a single premium PRSA.
- His ongoing regular contributions were then redirected, to a PRSA (as even with the funding restriction of 1 times salary) he was still able to invest the same monthly amounts.
- We also ensured that the entire value of his pension was passed tax-free, to his spouse on death before retirement, his existing Executive Pension placed a death benefit restriction of four times his salary (a restrictive feature of all EPPs). The regular contribution AMC was now also reduced from 1.25% AMC to just 1.00% AMC.
- Finally, more flexibility at retirement was created. Come time to take his benefits, one of his new pension vehicles could be retired at age 60, but without the need to transfer it out to an ARF, i.e. providing a tax-free lump sum and regular income, by vesting the first PRSA. He could then continue working and contributing to the second PRSA, or also retire the second PRSA, transferring into an ARF at 0.75% AMC.
Important Note
Although new funding restrictions came into effect on director, company funded PRSA’s on 1st Jan 2025, the ability to transfer from an Executive Pension to a company funded PRSA, still remains. This option creates the opportunity to lower charges and enhance your future retirement benefits, in terms of both monetary value but also drawdown flexibility. However, with that said where you’re arriving late to the table in terms of maximum pension funding, especially if your a trading company director, as opposed to a professional contractor then the Master Trust – EPP may prove more beneficial but we can still reduce your overall costs.
Better Executive Pension – Review
To arrange your free no-obligation discovery consultation by phone contact us today.
Contact: Ken O’Gorman – Director – CB, QFA, RPA, SIA – Retirement Planning Specialist – One Quote Financial Brokers on: 01 845 0049 or email: ken@onequote.ie
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