Executive Pension Plans are taken out by Company Directors or Employers to provide for the Retirement of executives and key employees. They are set up under Trust.
The Employer normally acts as Trustee. However, with the advent of Trustee Training most providers have trustee solutions for clients who wish to act as Trustees. Both employer and employee can make contributions, but it is a Revenue requirement that the employer must make a meaningful contribution on an on-going basis.
All Life Companies will provide Executive Pension products and the key factors to consider when choosing a provider are:
- The performance of the fund manager over recent years
- Structure of the underlying product, i.e. allocation rates and management charges – do trail commissions apply?
- The advice being offered by the Broker or Life Company, if direct
- The ongoing support available
When deciding how much you would like to contribute, a big contributing factor will be the age at which you want to retire. Another factor worth noting is the age at which you may qualify for the state pension may have changed by the time you reach your normal retirement age.
N.B. The Government have increased the age at which most people will now be eligible to claim the State Pension (Contributory).
Tax Benefits As mentioned Executive Pension Plans provide excellent tax benefits to both the employer and employee and these are that all contributions made by the company into an Executive Pension Plan can usually be offset against Corporation Tax as an allowable business expense (subject to Revenue limits).
Ceiling on maximum pension fund – There is a limit on the maximum pension fund that you can build up by retirement. With effect from January 214 this limit was set at €2,000,000. This includes funds from all pension arrangements, and also includes the capital value of any pension rights which have already been drawn down since 7th December 2005.
Where this limit is exceeded, the excess in pension funds at retirement is subject to a once-off income tax charge at the rate of 41%.
In general we recommend that employees make the maximum pension contributions they can afford.
For a graphic illustration of the tax reliefs available through a Pension Mortgage click on the “Contact Us” section on the right and we will forward a spreadsheet to you.