Pensions

Company Pension Arrangements

An Executive Pension is a pension set up by employers for executives or key employees of the company. The pension is set up under a trust and typically the employer will act as the trustee.

With an Executive Pension both employees and employers can make contributions. The ultimate value of your pension plan will depend on the contributions you and your employer have made over the years and the investment return the funds have achieved in your Executive Pension.

Not only does an Executive Pension provide you with a long-term plan for your retirement, it is also a tax efficient way for you to set aside money for when you retire as well as being a tax efficient way for your employer to provide you with employee benefits. In addition to employer contributions you may be able to contribute up to 40% of you income (depending on your age) into your Executive Pension and claim tax relief.

Southeast Financial Services will talk to you about your expectations for retirement and your personal circumstances. In understanding what you hope to achieve we can offer you helpful advice in deciding if an Executive Pension is a suitable plan for you.

At a minimum, Irish companies must legally offer a Personal Retirement Savings Account (PRSA) arrangement to their employees. Although compulsory, it can be great for your company and the employee. There are a number of alternative arrangements to a PRSA as follows:

PRSA

This is the minimum legal requirement in Ireland. Southeast Financial Services can set this up quickly, communicate to your staff, and train your payroll administrator.

The key points of a PRSA arrangement are:

  • Employer does not have to contribute
  • Employer must facilitate employee contributions via payroll
  • Employee’s decision to avail of the PRSA provided by the employer or go private.
  • PRSA belongs to the employee and there is no trustee requirement.

Contributions by the employer to the employee’s PRSA are treated as a Benefit in Kind and are not tax efficient. If, as an employer, you want to contribute you should get advice from an IFA on changing the structure.

Contributions by the employer and the employee fall under the individual’s revenue limit based on their age.

Company Pensions, also known as, Occupational Pension Schemes

As an employer, you may want to provide a company pension to your employees. This is a tax efficient way of providing extra benefits as part of the job. There are a number of advantages:

  • Employer contributions do not count towards the individual’s revenue limits (above)
  • Employer contributions are treated as a business expense and avoid Employee PRSI
  • Staff retention and satisfaction is improved with the extra benefits
  • Auto Enrollment may be on the cards for Ireland, and you will be ahead of the curve

The vehicle you use for your staff depends on what benefits you want to provide. If you are a limited company there is a number of options available.

Personal Pension

For Sole Traders, Personal Pensions are very popular, reducing your tax bill annually and also saving for a better retirement. We can talk you through the various options available to you, identifying the right company for you and by advising you on how much you should and could save in order to secure a comfortable retirement.

Executive Pension

For Limited Companies, Executive Pensions are an excellent way to ensure that you are funding for employer and employee pensions in the most tax efficient manner. You can also transfer any old pension arrangements into your new company pension. Funding limits are higher than the normal personal thresholds and contributions by the business can reduce your Corporation Tax Liability. They can be set up in parallel to the company group scheme or PRSA.

This is an exceptional way to plan sale/exit from your business, lump sums into your pension can avoid capital gains tax and income tax. Planning in advance and getting money advice from Southeast Financial Services can save you a significant amount of tax in the future.

Small Self-Administered Scheme (SSAP)

A Small Self-Administered Pension (SSAP) is a corporate pension scheme with 12 or fewer members. A SSAP is established under trust by your employer, for your benefit. Each director should have their own SSAP and this allows more flexibility in terms of investments that the SSAP can make. It should be noted that you do not have to be a director of a company to establish a SSAP. Any employee can set up a SSAP with the permission of your employer.

Some benefits of the Small Self-Administered Scheme:

  • Allow self-direct investment into wider areas such as shares or commercial property
  • More control and privacy as you are not part of a wider group scheme and therefore get to choose your own investment vehicle
  • Ease of trusteeship with simple training requirements

Also an exceptional way to plan sale/exit from your business, lump sums into your pension can avoid capital gains tax and income tax. Planning in advance and getting money advice from an IFA can save you a significant amount of tax in the future.

Group Scheme

Group Schemes are arranged for all staff, with rules tailored by the employer. For example, the employer may only offer the pension to employees who have been with the company for 2 years, or after their probation ends.

The key points of a group scheme offering are below:

  • Pension Administrator & Fund Manager chosen by the employer
  • Deduction taken at source from payroll
  • Trustees can be internal or external
  • Contributions can be voluntary or mandatory
  • Employer must make a “meaningful contribution” but can choose what level they want to contribute in addition to that.
  • Employer contributions are treated as a business expense and not subject to Employer PRSI
  • Additional benefits may be added on to complete the employee benefit package.

Contact us and we will take the company objectives to market and comes back with the best solution for your company needs.

Additional Benefits

Tax relief makes setting death benefit through a pension attractive. Employers can also add on serious illness, income protection, and health insurance. Most benefits can be treated as a business expense, while some are treated as a benefit in kind.

With a list of employees’ dates of birth and salaries, Southeast Financial Services will price a group benefit scheme with no obligation. Contact us for more information.

Generous tax relief for for the company

Any Occupational Pension (Company) Scheme is a great way to attract and retain talent to your organization in an incredibly tax efficient manner. It can also make a huge difference to your employee’s overall retirement position in the future.

Contributions made by the company into an Executive Retirement Plan can usually be offset against Corporation Tax as an allowable business expense (subject to Revenue limits).

Contributions made by the individual scheme member to his / her executive pension plan are tax deductible for the individual against net relevant earnings. The current maximum limits for income tax relief are as follows:

Age Maximum Tax relief as % of Earnings (NRE)

< 30 15%
30-39 20%
40-49 25%
50-54 30%
55-5 35%
> 60 40%

The limits above are capped to a maximum earnings ceiling of €115,000 for 2011.

It is possible to backdate personal once off contributions paid in the current tax year, to the previous tax year, once the contribution has been made before Oct 31st. It also possible to carry forward any excess contribution made, in order to gain tax relief in future years.

Our Services to Members of Group Pension Schemes

We can provide members of defined contribution group pension schemes the following independent advisory services –

  • Pension Funding Review – we can analyse your pension position, by looking at your target pension, your contribution level and your pension investment performance.
  • Leaver options – when leaving service of your current employer, you will typically be offered a number of leaving service options with regard to your accumulated pension fund. We can help individuals understand what these options are and also explore the pro’s and con’s of each.
  • AVC investment – Members of group schemes may wish to look at external pension products for their AVC contributions

If you are happy with our service, we would be delighted to continue our relationship with you, in other areas of your important money matters such as, financial planning, mortgage advice, Investment/Saving, retirement planning and personal protection, please browse these links for more information.

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