July 21, 2015
21 Jul 2015

Confused about Executive Pensions?

What is an Executive Pension Plan?

Executive Pension Plans are taken out by employers to provide for the retirement of executive and key employees.  They are set up under trust with the employer normally acting as trustee.  Both employer and employee can make contributions, but it is a Revenue requirement that the employer must make a meaningful contribution on an ongoing basis.

Your pension is an essential part of your financial planning.  The tax relief and long term nature of a pension make it an excellent retirement planning tool.  An Executive Pension Plan provides you with a plan for retirement and can be a tax efficient way for your employer to provide you with employment benefits.

When thinking about the type of pension pot you’d like to have, 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 which may have changed by the time you reach your normal retirement age.  The Government has increased the age at which most people will now be eligible to claim the State Pension (Contributory).

It is never too late to benefit

Executive Pension Plans provide excellent tax benefits to both the employer and employees.  Depending on your age, you may be able to contribute up to 40%* of your income each year into an Executive Pension Plan and claim full tax relief.

Tax Benefits For Employers

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).  Executive Pensions offer considerable flexibility in relation to the timing of a company’s contributions to the plan.  The company can choose to make regular contributions to the plan and /or lump sum payments to tie in with the company’s profitability subject to Revenue terms and conditions.

Tax Benefits For Employees

You can also benefit from tax relief on any personal contributions you make.  Tax relief is normally available at your marginal rate of tax up to a maximum of 40%* (subject to terms and conditions) of earnings each year, depending on your age.  This reduces the net cost of your pension contributions considerably.

* An annual earnings cap of €115,000 will apply to an employee’s pension contributions for the purposes of tax relief. It should, however, be noted that in certain circumstances contributions may have to be restricted in order to ensure that Revenue limits are not exceeded. It is important to note that tax relief is not automatically granted. Revenue requirements must be satisfied.

If you would like any advice on Executive Pensions please contact our office to talk to one of our experienced advisers on 1890 60 65 70.


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