An Executive Pension is a pension set up a Ltd company for the directors/executives 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), its more tax advantageous for employers 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 pensions plans offer huge advantages over personal plans particularly when it comes to higher contribution limits and tax relief.
Contributions limits are much higher and employer contributions effectively receive 52% tax relief as opposed to up to 40% on personal pension plan alternatives and while there is an earnings cap of €115,000 for personal contributions, there is no cap for Employer pension contributions.
Contributions are typically made through the company’s bank account monthly and lump-sum payments can also be injected e.g. before your company year-end. You can set up a pension for anyone employed by the company who is drawing a salary, including your spouse if they are a director.
Executive Pension Plan – Key Highlights:
Can be fundable through company contributions.
Full corporation tax-relief.
No USC or PRSI on employer paid contributions.
Up to 52% tax-relief on employer contributions.
No benefit in kind.
Tax-free investment growth.
25% retirement lump sum.
Fund access from age 50 onwards.
Allows a 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.
Both access and advice need to be ongoing so we provide 24/7 online access, with regular market monitoring and investment updates. This fully comprehensive service is built into your plans annual management charge known as the AMC.
At One Quote Financial Brokers, our advice based private executive pension plan offerings include:
Free Personal Consultation.
The Lowest Annual Management Charges (AMC’s).
The Broadest Fund Choice, Active & Passive.
Quarterly Investment Updates.
100% Net Investment Allocation.
24/7 Online Plan Access.
Free Fund Switching.
Annual Benefit Statements.
Self-directed Plan Option.
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.
Cash Lump Sum
You can draw a 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 lump sum where the first €200,000 is tax-free and the balance up to the €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.
One Quote Financial Brokers partnered fund managers include a choice of; Zurich, Aviva, New Ireland, Irish Life, Friends First, 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