An Executive Pension is a pension set up a Ltd company for the directors of the company. The pension is set up under a trust, which is often provided free. Both employers and employees can make contributions, although in the case of owner directors (including contractors), it’s much more tax advantageous for company monies to fully fund the plan.
The average person retiring tomorrow aged 65 years has a life expectancy of between 20 years, that’s a significant amount of time to enjoy in retirement.
It takes a long time to save for retirement and the earlier a person starts the better.
Taking stock of your existing pension can reduce investment charges and allow greater control over your benefits come retirement.
Executive Pension Advantages
Executive pension plans offer huge advantages over personal plans particularly when it comes to higher tax-deductible contribution limits and the option to draw down the benefits from age 50.
Employer contributions effectively receive 52% tax relief as opposed to up to 40% on personal pension plan alternatives.
Also, while there is an earnings cap of €115,000 for personal contributions, there is no cap for employer pension contributions, which allow the use of company monies to fund for a maximum projected pension of 2/3rds of your final salary and a maximum retirement fund of €2m.
Regular pension contributions are made by direct debit through the company’s bank account monthly and variable lump-sum payments can also be injected at anytime e.g. before your company year-end. You can set up an executive pension for any senior executive or director employed by the company who is drawing a salary, including your spouse.
Executive Pension Plan – Key Highlights:
Can be entirely funded through company contributions.
Full corporation tax-relief.
No USC or PRSI on employer paid contributions.
No benefit in kind.
Your investment grows free of both capital gains tax and income tax.
25% retirement lump sum.
Fund access from age 50 onwards.
Your Executive Pension is portable meaning transfer it to an new company pension if so needed and can also accept transfer in from previous employer pensions.
You can plan how your eventual retirement benefits are taken, in order to reduce your tax liability. For example, you may take a portion of your benefits as a pension lump sum and/or set up an Approved Retirement Fund (ARF) to keep your investments in a tax-efficient environment.
Allows an owner director to ring-fence company money in their own name and away from their business.
Pension Investment Videos
Starting an Executive Pension Plan
The Right Advice
There are several ways to best set up your Executive Pension Plan dependent on your individual circumstances. Our job is to provide the best pension advice, offering the broadest range of investment choices, with minimum cost aligned to your personal investment risk profile.
When arranging your pension plan you need to be fully aware of the underlying costs involved, when also choosing the right investment funds and strategy to grow your pension fund over time.
Broker access and advice need to be ongoing, so we provide 24/7 online access combined with regular investment updates. This fully comprehensive service is built into your plan’s single annual management charge levied against your pension pot, which is known as the AMC. This will never exceed 1% PA and can be even lower, depending on the type of funds you choose. There is no charge levied against your pension contributions, so 100% of all pension contributions are invested.
At One Quote Financial Brokers, our advice based private executive pension plan offerings include:
Free Personal Consultation.
Single Low Annual Management Charge (AMC).
Broadest Investment Choice: Mutual Funds, Direct Stocks, & ETF’s.
100% Investment Allocation.
24/7 Online Plan Access.
Free Optonal Fund Switches.
Annual Benefit Statements.
Self-directed & Insured Options.
Free Trustee Services.
Executive Pension Plan Retirement Benefits
Your Options at Retirement
A company may make whatever contributions are necessary to build up a pension fund which will provide a director with a pension of 2/3rds of final pensionable salary – subject to a maximum fund value of €2m (for allowable tax-relief).
Come retirement, when you’re ready to take your benefits your options are to take a tax-free lump sum and buy an Annuity which is a paycheque for life, or having taken your lump sum to reinvest the balance in an ARF and make income withdrawals from that.
Tax Free Cash
You can draw a tax-free lump sum based on your salary and service to a maximum of 1.5 times final remuneration where you have more than 20 years of service or you can take a lump sum based on 25% of the value of the pension pot. A limit of €500,000 applies to the tax-free lump sum where the first €200,000 is tax-free and the balance up to €500,000 is taxable at 20%.
An annuity pays a retirement income for the rest of your life in exchange for the balance of your pension pot at retirement.
An ARF allows you to retain your pension pot at retirement, subject to minimum withdrawals and can be passed on to your family on death.
Executive Pension Fund Choice
Assessing your investment options
As a pensions broker, we compare the market for the best pension products and offer the broadest range of investment fund options including; multi-asset, with-profit, alternative, and self-directed options. We also offer ESG investing which incorporates environmental, social, and governance elements into the investment process.
Offering huge choice our partnered fund managers include a choice of; Zurich, Aviva, New Ireland, Irish Life, Friends First, Standard Life, Columbia Threadneedle, BlackRock, Dimensional, BNP Paribas, Legal & General, BNY Mellon, State Street, Goodbody, Merrion, JP Morgan, and Invesco.
Existing Executive Pension Review
Existing Pension Plans – Cost Reduction Audit
If you already have an Executive Pension Plan in place, you need to be sure of 3 things:
That the underlying investments are in line with your attitude to investment risk
That the plan is being funded directly through company monies.
That the underlying charges are reasonable and transparent
Many Executive Pension Plans are been overcharged by inbuilt plan costs, including:
Investment Contribution Charges
Ongoing Adviser Commissions
Excessive Fund Manager Fees
If you’re in any way unsure about your Executive Pension Plan charges, then you should consider talking to One Quote about a cost saving pension review.
If you have any questions with regard to setting up a new plan or leaving an existing employer pension, please visit our FAQ section or call us on: 01 8450049