Use company Bonus to start a pension?

K

kane3000

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Hi there - my brother is 42 and has no pension.

He is about to get quite a substantial company bonus. Can he simply have the bonus paid straight into a new personal pension fund without paying tax at source and use that to start his pension?

Thank you.
Kane
 
No.

That would be salary sacrifice.

How much does he want put into the pension and is the employer a large corporate or an owner managed company?
 
Thanks for response Gordon.
Yes company is a US corporate and he is looking to put in 100k. Note the company don’t provide any kind of fund or matching contribution.
 
Not possible unfortunately would be my sense. If an employee asks for bonus as a pension contribution, that’s salary sacrifice. Smaller employers have been known to document things more advantageously.

The best bet might be to AVC for last year up to the max prior to 31 October and AVC for this year also.

e.g. 40 year old on €200k a year sticks €57,500 in (half for 2018/half for 2019).
 
Gordon Gekko said:
Not possible unfortunately would be my sense. If an employee asks for bonus as a pension contribution, that’s salary sacrifice. Smaller employers have been known to document things more advantageously.

The best bet might be to AVC for last year up to the max prior to 31 October and AVC for this year also.

e.g. 40 year old on €200k a year sticks €57,500 in (half for 2018/half for 2019).
Click to expand...

Just to clarify on Gordon's figures, there's a cap of €115,000 salary that you can base pension contributions on and claim tax relief. So a 40 year old on €200,000, can contribute 25% of the first €115,000 of his salary and claim tax relief on the contribution.

The salary sacrifice is based on contract law. The brother's contract would say he is entitled to a bonus of X, based on Y. If the employer doesn't pay it as in the contract and pays a pension contribution instead, they are in breach of contract. He would need a new employment contract to get bonus payments redirected into a pension.


Steven
www.bluewaterfp.ie
 
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