# Personal Vs Executive Pension



## Pexus1976 (23 Jun 2006)

Hello, 

What are the main differences/benefits/options for a self employed person considering taking out a Personal or Executive Pension.

If the Executive pension is chosen what are the tax benefits compared to the personal pension? 

Approaching the end of year tax returns for self employed when can voluntary contribution be made in order to claim back tax for the previous year?

Why should a PRSA be considered over a standard Personal/Executive Pension i.e. what are the benefits and draw backs?

Are PRSA performing well, as I've heard many life companies are finding them difficult to sell compared with the standard pensions available?


Apologise if these questions have been asked before!

Thanks
P


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## ClubMan (23 Jun 2006)

Pexus1976 said:
			
		

> What are the main differences/benefits/options for a self employed person considering taking out a Personal or Executive Pension.


 I think that some pensions that are marketed as executive pension plans are, in fact, the same as those marketed as personal pension plans. However some may differ and, of course, the pension and tax issues for an executive (director for example) or other self employed person may be different than for a _PAYE _employee. I'm sure somebody else will be able to comment more authoritatively/comprehensively than me.


> Approaching the end of year tax returns for self employed when can voluntary contribution be made in order to claim back tax for the previous year?


 October 31st for self employed or employees. See this thread:

October 31 - what does it mean for PAYE worker?

Bear in mind that there are arguably advantages in drip feeding contributions on a more regular basis rather than in single annual lump sums due to so called dollar (or €) cost averaging.


> Why should a PRSA be considered over a standard Personal/Executive Pension i.e. what are the benefits and draw backs?


 When choosing any pension plan one needs to look carefully at stuff like the charges that apply, the funds available, the flexibility offered (e.g. being able to vary/stop/restart contributions without penalty etc.), the customer service offered etc.


> Are PRSA performing well, as I've heard many life companies are finding them difficult to sell compared with the standard pensions available?


 Do you mean are they selling well (no) or are the funds in which they invest doing well (as with any investment it depends on which fund - note that many _PRSAs _offer the same funds that are available through other pension and general investment vehicles).


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## Pexus1976 (23 Jun 2006)

Clubman thanks for your reply.

_I think that some pensions that are marketed as executive pension plans are, in fact, the same as those marketed as personal pension plans. However some may differ and, of course, the pension and tax issues for an executive (director for example) or other self employed person may be different than for a PAYE employee. I'm sure somebody else will be able to comment more authoritatively/comprehensively than me._

Makes sense, heard that self employed can claim up and over 40% tax relieve in relation to investing in a executive pension. But maybe wrong.

_October 31st for self employed or employees. See this thread:

__October 31 - what does it mean for PAYE worker?_

_Bear in mind that there are arguably advantages in drip feeding contributions on a more regular basis rather than in single annual lump sums due to so called __dollar (or €) cost averaging__._

Do the self employed have an option of throwing in a lump sum after this date ie 30th Nov?? Bit confused over these dates..

_Do you mean are they selling well (no) or are the funds in which they invest doing well (as with any investment it depends on which fund - note that many PRSAs offer the same funds that are available through other pension and general investment vehicles)._

Sorry I should have clarified, I meant selling well. Thanks for your reply.


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## Guest126 (23 Jun 2006)

Executive Pensions are available to company directors and other employees of companies...so the company can contribute more than the 40% max that applies to personal contributions.

A self-employed person is stuck with the usual tax related limits of:
15% <30
20% <40
25% <50
30% <55
35% <60
40% once age 60

An Executive Pension is different to a Personal Pension because a company can contribute to it.


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## Pexus1976 (23 Jun 2006)

Hi Capitalccc thanks for your reply.

Am I correct in saying that a Ltd company can take out an Executive Pension.... and therefore the owner/executive does not contribute to the pension but in fact the company/entity makes contributions therefore obtaining up to 40% tax releive? 

A self employed person i.e. sole trader does not have this option. But has the option of investing in a personal pension or a PRSA with tax releive applying to his marginal rate of return and age.


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## Guest126 (23 Jun 2006)

Hi P - yes and no!

It is the company that takes out Exec Pension - but the company or the director/employee can contribute to it.

The main difference is that the company can contribute more than 40% of salary for a member, the contribution limits can sometimes be much higher than 40% of salary...the director/employee has to stick to the usual limits.

Self-employed person must go down Personal Pension/PRSA route, contrinution limit depends on age - as shown earlier - and relief is at the marginal rate.


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## Pexus1976 (23 Jun 2006)

Capitalccc thanks for the helpful information.

Regards
P


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## Guest126 (23 Jun 2006)

You're welcome Pexus!


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## ClubMan (23 Jun 2006)

Pexus1976 said:
			
		

> Do the self employed have an option of throwing in a lump sum after this date ie 30th Nov?? Bit confused over these dates..


I don't think so. As far as I know the 31st October deadline applies to both employees, self-employed and directors as far as claiming tax/PRSI relief in respect of the previous tax year is concerned.


> Sorry I should have clarified, I meant selling well. Thanks for your reply.


The take-up of _PRSAs _has been pretty poor to date. This should not concern anybody who has taken one out - i.e. it doesn't make their _PRSA _less safe than any other class of pension.


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## Pexus1976 (23 Jun 2006)

Thanks Clubman


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