# Company directors pension scheme



## trigger3 (13 Jan 2017)

If I am a director and 100% shareholder of a private limited company, are there any restrictions in terms of total annual amounts that the company can pay on my behalf into a directors Self Administered Pension scheme?


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## Conan (13 Jan 2017)

Yes, but it's complicated. 
In essence, the Co. is limited to investing such amount as will likely provide Revenue maximum benefits:
- pension of 2/3rds of projected final salary
- indexation of pension in payment
- spouses pension on your death in retirement

There are a set of actuarial tables which can calculate how much of an annual contribution your Co. can make based on your current age, expected retirement age, marital status, current salary etc. 
You cannot contribute more than will likely generate a fund that will provide benefits in excess of the Revenue limits. In addition there is also a maximum fund limit of €2m (any value in excess of €2m is subject to a penalty tax).
Hope this helps.


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## Steven Barrett (18 Jan 2017)

When setting up a self administered scheme, Revenue approval has to be sought before a contribution is made. A submission has to be made to the Revenue on how much you can contribute to the plan. This takes two forms: 

1. The annual contribution you can make to fund for the maximum pension (as per Conan)
2. Any special contribution you can make for past service and a reduced annual contribution. 

Retained benefits are also taken into account when coming up with the figure. 


Steven 
www.bluewaterfp.ie


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## trigger3 (27 Jan 2017)

So lets say I took a salary of €50k within the company financial year and the company made total payments of €50k in the same year into a pension sheme for me, would I be entitled to full corporation tax relief on the full €50k pension payments or is it restricted to a portion of my €50k salary for this period?


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## Conan (27 Jan 2017)

The answer is ...probably. How much of an Annaual Contribution the company can make is dependant on your age. For example, if you were aged 45 and adopted a target retirement age of 60, then the Co. could invest 100% of salary per annum. And the full contribution would be allowable as a business expense.


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## trigger3 (27 Jan 2017)

Conan said:


> The answer is ...probably. How much of an Annaual Contribution the company can make is dependant on your age. For example, if you were aged 45 and adopted a target retirement age of 60, then the Co. could invest 100% of salary per annum. And the full contribution would be allowable as a business expense.



Thanks, so in the case of a 29 year old would 100% still be allowable or is this something that the provider of the SSAP will know themselves?


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## Conan (27 Jan 2017)

For a 29 year old a contribution of 100% of salary would not be permissible, as if maintained to say age 60 it would provide benefits in excess of Revenue limits. Your SSAP provider should be able to advise you on the limit for a 29 year old.


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## Gordon Gekko (27 Jan 2017)

It's a function of length of service to normal retirement age, salary, and existing benefits, all feeding towards a fund that can deliver a pension equal to 2/3 of final salary.

So it depends. One needs to run the numbers.


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## Dec05 (31 Jan 2017)

Are these restrictions only in respect of a Self Administered Pension Scheme ? Do they equally apply to a pension whereby the company makes contributions on behalf of the directors ie the directors don't contribute themselves.


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## gnf_ireland (31 Jan 2017)

Dec05 said:


> Are these restrictions only in respect of a Self Administered Pension Scheme ? Do they equally apply to a pension whereby the company makes contributions on behalf of the directors ie the directors don't contribute themselves.



My understanding is they apply to all pensions - including standard executive pensions



trigger3 said:


> Thanks, so in the case of a 29 year old would 100% still be allowable


I would question the merit in doing this depending on a number of factors. I would also question the merit of a Self Administered Pension Scheme for someone so young, especially if you are only starting out your pension contributions. Are you really going to be able to actively manage the pot for 30 odd years, and will it be practical to do it. You can always change it to a Self Administered pension in the future if you wish.

A pension is a long term savings plan for retirement. Most 29 year old people have a lot of living to do between now and then, and may need/want to buy a house, have a family etc. While there is clear tax benefits with pension contributions, there is also a large opportunity cost.

I think you need to consider if you don't own a property, your qualifying salary for a mortgage in that case is 50k. It should also depend on the other savings you have etc.

I was in a similar boat to yourself back a decade or so ago. I made decent pension contributions during this period, and the pension fund is currently in a relatively healthy state. I took the rest out in salary, and paid the tax on it (and I accept it is hard and painful at times), but it allowed me to have a sizeable deposit on a house, and in a position a few years later to be practically mortgage free. I would never have been able to do this if I paid 50% of my salary into a pension.

Finally, from my point of view (and I am sure others will disagree with me on this), but a pension pot of around 1 million is the 'right' size for most people if they can afford to build a pot that size. This would allow you to take out 200k tax free (which is the maximum) and have 800k left in the pension pot. Assume you decide to withdraw 4% a year  gives you an annual pension of 32,000 - so just below the max for 20% tax band. Anything more and you are paying marginal tax on it. I see no real benefit in having a pension fund where you are paying marginal rates of tax on to take the money out. I would just pay the tax on it as income and for the money to be mine with no further tax liability.
*This is subject to peoples marital status, early retirement plans etc*


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## Gordon Gekko (31 Jan 2017)

Those restrictions apply to occupational pensions, which Self-Administered Pensions and Executive Pensions are.

Self-Adminstered tends not to make sense until the fund is at a meaningful level, as the annual fees can be high relative to the value of a smaller fund (e.g. <€400k).


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## Steven Barrett (2 Feb 2017)

The fees have come down an awful lot Gordon and are much more accessible than they used to be. If you still go under the old SSAS structures, you will pay €1,000 - €2,000+ a year in fees. There are some that charge an AMC with access to ETF's and lots of other funds. You still need to have a decent whack to start off and not suitable for contributions under €1,000 a month. 

Steven
www.bluewaterfp.ie


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## Dec05 (13 Feb 2017)

Conan said:


> Yes, but it's complicated.
> In essence, the Co. is limited to investing such amount as will likely provide Revenue maximum benefits:
> - pension of 2/3rds of projected final salary
> - indexation of pension in payment
> - spouses pension on your death in retirement



Where though would this information be picked up and approved and / or challenged ? (I mean for pensions excluding Self-Administered pensions).
If a company makes a contribution to a directors pension scheme, this is only included a a line in the Corporation Tax return and as one line in the P35L. So if a company, in error, over contributes to a pension fund how is it dealt with ?


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## Steven Barrett (13 Feb 2017)

If a company overpays, the tax relief is carried forward to the next year. If you claim all tax relief in one year, the Revenue have the power of reversing the tax relief. It may be discovered in a Revenue audit or it may never be discovered at all. If the pension benefits on a whole are overfunded, it will be discovered at claim stage. 


Steven
www.bluewaterfp.ie


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## Dec05 (13 Feb 2017)

Thanks for your reply.


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