Executive Pension – FAQ’s

Find the answers to Executive Pensions most frequently asked questions. Learn about everything form 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 do all the heavy lefting in finding your best value solution!

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Pension Planning top-tips
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Executive Pension top-tips

  1. The limits on contributions to an Executive Pension are significantly greater than a Personal Pension.
  2. The tax relief is also more attractive. The maximum rate of relief on a Personal Pension contribution is 40%. If you contribute to an Executive Pension it is effectively saving you tax at 52%
  3. You can also claim the benefit of your pension from the age of 50 vs age 60 in a Personal Pension.

 

Executive Pension – 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 form 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: €206.30 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.

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 reinvest the balance and only have to pay a lower rate tax (currently 20%) on withdrawals.
How much can I contribute to my pension through my Limited company?

When it comes to the company making the contribution on your behalf, as is the case with an Executive Pension, there are 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!
 

  1. Age
  2. Gender
  3. Marital Status
  4. Chosen Retirement Age
  5. Salary
  6. Previous Pensions
  7. Years of service with the current employer
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.

I am leaving my job, what should I do about my pension?

You have 4 options:
 

  1. Retaining your benefits with the scheme – this means the funds will remain invested and you can claim at any age from 50.
  2. Transferring your benefits to a new employer’s Occupational Pension Scheme – you can opt to transfer the value of your fund into your new employer’s pension scheme (if applicable).
  3. Transfer benefits to a Personal Retirement Bond – A Personal Retirement Bond (PRB), which is also sometimes known as a Buy-Out-Bond, is used by the trustees of a pension scheme to buy retirement benefits for former members of their pension scheme. A PRB is a personal policy in the name of the PRB holder. When a member leaves a pension scheme, the value of their fund when they leave the pension scheme is invested in the bond. When they retire, they can then use the proceeds of the PRB to provide retirement benefits.
  4. Transfer to a PRSA – This option is restricted to those with under 15 years of pensionable service with their former employer. If the value of your pension is greater than €10,000 you will be required to pay for a Certificate of Comparison showing the pros and cons of transfer to a PRSA. A Certificate of Comparison can typically cost anything between €500 and €2,000 depending on the circumstances. A Certificate of Comparison is not required if the pension scheme is winding up.
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 on-line access to your pension plan from inception, with regular investment performance reviews.

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.