# What is the max percentage that an employer can contribute to an employee's pension?



## SqueezedMiddle (12 May 2017)

I just had another job offer paying me about 30% more than my current one.
The only reason to move is the money.  The job will basically be the same and I intend to retire in another 5 years.

When I told my current employer they offered to match the salary straight away.
But I have a better idea if it will fly.

Currently they contribute 7.5% to my pension and I contribute the max 25% on top.
Could I get them to add whole lot of the increase into pension without any issues like max percentages etc. ?

If not the whole amount, what is the max portion could I get them to contribute and getvtax relief on instead of just adding it to my salary?

Thanks


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## Gordon Gekko (12 May 2017)

There are a few issues here...salary sacrifice and then the maximum permitted contributions. Plus the HR issues.

How much have you in the fund at present, how old are you, and what's your salary?


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## SqueezedMiddle (12 May 2017)

I'm late 40s
Current salary is early 60s plus bonuses and other stuff.
New salary proposed to me is 85

Basically I would like all of they not as a salary increase but as a employer pension contribution.  And salary to remain the same.

I don't know if it's even possible but I'm thinking pension rather than sandy these days as I don't really need the extra money


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## Steven Barrett (12 May 2017)

I think he would be ok on salary sacrifice at the moment Gordon as he isn't yet giving up anything that's in his contract of employment. He can negotiate a new contract with higher pension contributions. 

There is no max employer contributions like you are restricted to for personal contributions. It is the amount of money required to fund the maximum pension allowed under revenue rules. If you intend to retire early, that also has to be taken into consideration in the calculations. 

You should ask for the scheme advisor to run the calcs for you. 


Steven
www.bluewaterfp.ie


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## SqueezedMiddle (12 May 2017)

That's great news.  Thanks.
I wanted to find out before I propose it to them.  I'll be talking to them about it tomorrow and mention it.


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## asdfg (18 May 2017)

There is also a saving to your employer as they don't have to pay the employers element of the PRSI currently 12 per cent
You could ask your employer to add the 12 per cent to your pension if your brave


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## SqueezedMiddle (19 May 2017)

Thanks guys.
All sorted now.
I made the suggestion that I would stay if they matched the other offer but instead of increasing wages, they increased employer pension contributions. 
They went to finance and they okd it so it's all done.
Ive been told that it will effect my tax free lump sum, but I'm not bothered about that at all.
Just trying to maximise my pension for the next few years.


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## jjm (19 May 2017)

Can any poster explain how/why it effects tax free lump sum . My understand  once both are putting in  a % it will not.


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## SqueezedMiddle (19 May 2017)

jjm2016 said:


> Can any poster explain how/why it effects tax free lump sum . My understand  once both are putting in  a % it will not.



As I understand it, it effects percentage of final salary calculation.  And I think tax free lump sum is based on that.


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## Gordon Gekko (19 May 2017)

SqueezedMiddle said:


> As I understand it, it effects percentage of final salary calculation.  And I think tax free lump sum is based on that.



Only if you're going down the 1.5 times final salary route, and if you're comparing the salary that you never had versus your new arrangement. 

A red herring in my view.


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## SqueezedMiddle (19 May 2017)

I agree. Not bothered about that aspect of it at all.


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## jjm (19 May 2017)

Gordon 
so what you are really saying is once your pension pot is high enough to take up to 25% allowed tax free is higher than 1.5 times final salary there are no issue.


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## Steven Barrett (21 May 2017)

That's it exactly Jim. 

Very few go down the 1.5 times salary route these days as you have to purchase an annuity with the remainder. Annuities are very bad value at the moment, so most people avoid them. 


Steven 
www.bluewaterfp.ie


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## SqueezedMiddle (23 May 2017)

I was talking to a friend about retiring early too and he was asking me if he could not use his pension fund for an annuity, but instead just buy an arf.
I wasn't sure but I told him he may not be allowed to do that.  Was I right or right or wrong?


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## gimp (23 May 2017)

Something to consider...........if you have an income protection policy attached to your pension and you need to claim on it at some stage. Your salary level will be lower. I am not sure if your Employers contributions would be added to your final salary for the calculation. Maybe worth checking on


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## Steven Barrett (24 May 2017)

SqueezedMiddle said:


> I was talking to a friend about retiring early too and he was asking me if he could not use his pension fund for an annuity, but instead just buy an arf.
> I wasn't sure but I told him he may not be allowed to do that.  Was I right or right or wrong?



For company pensions, if you go the 1.5 times final salary lump sum route, you must purchase an annuity at retirement. If you take 25% of the fund value tax free, it's the ARF. 

For personal pensions and PRSAs, the only tax free lump sum option is 25%. You can purchase an annuity or invest in an ARF with the remainder. 

These are the silly rules in pensions that don't make sense anymore, especially with defined benefit pensions almost gone. 

Steven 
www.bluewaterfp.ie


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## SqueezedMiddle (25 May 2017)

Thanks for that info.
I didnt know any of that.
I thought that you wouldn't be allowed to just shovel your company pension into an arf.  I will direct my friend to this thread too.


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## Steven Barrett (26 May 2017)

When the ARF was introduced originally, it was only available to company directors, personal pensions and AVC's. It was opened up to all DC pensions about 8 (?) years ago. The AMRF was increased to €120,000 at the time too but brought back down as the revenue realised they were missing out on too much income as AMRF's aren't subject to imputed distribution. 


Steven 
www.bluewaterfp.ie


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