Executive Pension – FAQ’s

Find the answers to Executive Pension Plan most frequently asked questions. Learn about everything from tax breaks to plan types and what your options are if moving jobs, retiring early or come normal retirement age. As pension planning experts, we are here to answer all your questions and assist you in finding your best value EPP solution!

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Pension Planning top-tips
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Executive Pension top-tips

  1. To save fresh applications year after year its best to opt for a regular contribution plan from the start, as this also allows lumps sum additions at any time.
  2. By using your company to contribute to an Executive Pension it is effectively saving you tax at 52%
  3. Start your executive plan as soon as possible, as with 20 years plan service, you can avail of a 1.5 times final salary tax-free lump sum.

 

Executive Pension Plan – Frequently Asked Questions

Why should I have an Executive Pension?

Apart from it providing an income in retirement, an Executive Pension is the best and most tax-efficient way of extracting cash for your own benefit or for that of company executives from a limited company.

Will I still get the State Pension in addition?

Yes, all private pension holders are still entitled to the State pension in addition. The current State Social Welfare Pension is only: €248.30 per week. The contributory pension starts at age 66 and the non-contributory not until age 67. Executive pension plan benefits can be taken from age 50 onwards and will not reduce your State pension benefits.

As an Employer do I have to act as Trustee?

You can, but you don’t have to. The role of the Trustee can be an onerous one and for many companies that are focused on running their own business an overhead and\or time constraint that they don’t need.
One Quote Financial Brokers currently arrange free Trustee services for all new executive pension plan schemes.

What are the tax breaks under an executive pension?

An executive pension plan provides full tax relief on contributions, as well as tax-free fund growth and a tax-free lump payment option come retirement. This means;
 

  1. Company-funded executive pensions effectively receive 52% PAYE relief, plus corporation tax relief @12.5%!
  2. There is no DIRT or capital gains tax on investment growth.
  3. After taking up to 200,000 tax-free on drawdown, you can choose to reinvest the balance and only have to pay a lower rate tax (currently 20%) on withdrawals.
How much can I contribute through my own Limited company?

When it comes to the company making the contribution on your behalf, as is the case with an Executive Pension, there is a range of factors in determining how much can be contributed, which we have listed below. However, the important point is that your company can invest a lot more than you can personally and still benefit from tax relief! Whilst, in addition, the maximum retirement fund that you can build up is 2M, and if choosing to take the annuity route over the ARF route the maximum pension you can take is 2/3rds of your final pensionable salary.
 

  1. Age
  2. Gender
  3. Marital Status
  4. Chosen Retirement Age
  5. Salary
  6. Previous Pensions
  7. Years of service with the current employer
How much can I contribute to my Executive Pension as a Senior Employee?

The maximum contributions that can be paid to your Scheme by you and/or your employer will depend on your personal circumstances including company service and salary.

Subject to the above, there is no limit to how much you can contribute but tax relief on personal contributions is restricted. Only contributions paid by you will be considered for the purposes of determining maximum contribution limits for tax relief purposes, which equate to a % of net relevant earnings (annual salary) and increase with age starting from 15% under age 30.

How are contibutions paid?

Employers can pay regular or single contributions to their executive pension. An executive pension can also accept transfers from other executive pensions as well as previous group schemes – these would usually be paid as electronic fund transfers from other institutions.

Employers can pay a single contribution at any time into an executive pension. This can be done instead of, or as well as, paying regular monthly or annual contributions.

Senior employees and non-executive directors can make regular contributions on the same basis as their employer with the combined contributions payable through company payroll. They can also make one-off lump sum payments within Revenue Limits via EFT.

What are the different types of executive pension plans?

Insured Plans – the most popular type of executive pension is an insured plan provided through an insurance company. It allows investment in a choice of pooled funds also called unit-linked or mutual funds and offers the cheapest way of investing in assets which can include equities, bonds, property, commodities, and deposits.

Self-directed Plans – these plans offer a hybrid of insured fund options as well as access to your own choice of specific equities or shares, they tend to be more expensive than insured executive pensions.

Self-administered Plans – best suited to high-net-worth individuals who wish to select all their own investments, which may include direct property purchases, this is the most expensive option includes set-up fees, trustee charges, actuarial charges, and annual management charges in addition to any transactional costs associated with asset trades.

How do I ensure best advice and value for money?

We compare charges and investment performance of all leading insured and self-directed pension providers. We ensure that the recommended pension plan option, matches your appetite for investment risk and that any charges are fully transparent and kept to a minimum. We also offer you full online access to your pension plan from inception, with regular investment performance reviews.

What happens my pension fund if I were to die?

In the event of death before retirement, 4 times your annual remuneration at the date of death can be paid to your dependents, together with a refund of any personal contributions to the plan. The balance must generally be used to purchase an income for life for your spouse or any one or all of your dependants.

Post-retirement where you have already invested in an ARF, on your death the ARF can be transferred into your spouse’s name free of PAYE or Capital Gains Tax.

Can I cash in my pension early, if needs must?

You can now retire from age 50 and take 25% of your fund tax-free, under an executive pension.

If you have to stop working due to serious ill-health, you can take your pension benefits earlier than these stated ages!

Once you have taken your 25% tax-free, you can choose to reinvest the balance in an ARF (investing in funds for tax-free growth as before) and make regular and ad hoc withdrawals to provide an income.