It’s typically not until Irish company directors reach their early 50’s, that they seriously start thinking about their actual intended retirement age. But, its important to realise that any early retirement plans prior to age 60, can affect your ability to work again or to retain your company shareholding post early retirement.
Often, proprietary directors want to retain some level of control in the business, as opposed to selling it on early retirement, or want to drawdown their pension benefits, but stay on working in the business. This is where the Pension Plan Type can influence early retirement planning.
Director Pensions – Early Benefits Drawdown
The earliest that a company director can drawdown their pension benefits is always from age 50, but to do so before age 60 under an Executive Pension Plan (EPP) can for some prove restrictive. Not only must you have ceased the employment to which the EPP relates, but you will need to sell your shareholding and sever all links with the business.
However, under an EPP you can however go on to work elsewhere.
On the other hand, the holder of a company funded PRSA, can early retire between the ages of 50 and 60 and retain their shares. Although unlike with an EPP, you will need to have ceased all and every employment, so that you’re bona fide retired.
Which Plan Type?
- So, if you plan to get your hands on your executive pension pot before age 60, but retain the option to work elsewhere, then stick with an EPP.
- But if you’re done with the daily grind and plan to retire before 60, but you don’t want to give up your shareholding, then a company funded PRSA should be considered.
Other Considerations
- Other advantages exist with company funded PRSAs over EPPs, such as better death-in-service benefits and the ability to take a phased retirement (using multiple plans) yet each case must be considered individually.
- Where the director in question, is still some years out from taking their planned early retirement benefits and plans to make further large lump sum contributions, then a comparison of any funding restrictions must be considered. Generally, where the director has long service and strong salary level, and a single premiums exceeds once annual salary in that same trading year, then the Executive Pension wins out.
Retirement from age 60
Once you hit 60, you can access a PRSA or EPP, with no need to stop working in that company, or to sell your shares, however this needs to match the normal retirement age specified under your pension plan, so if its a later age e.g. 65, you will need to amend that in the first instance.
Contact Us
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
Or enquire online and give us a quick outline of how we can help.
