Company Pension Contribution Query

[KeenToLearn]

Hello,

I have a query about how I should manage my pension contributions from my limited company. I am currently the only employee of my professional services limited company. This is a standard arrangement in my industry.

I have 2 Pensions currently setup. Pension 1 is a PRSA I setup before I started the limited company and its value is approximately €100,000, all employee contributions at the time. I am aware of the allowable Employee pension contribution limits and bands per age.

I have not contributed to the PRSA since I setup Pension 2. Pension 2 is a 1 person Master Trust setup through the limited company. The value is approximately €94,000, made up of both Employer and Employee contributions.

When I complete the max funding calculation for the Master Trust, the max Employer contribution value allowable from the ltd company yearly is €33,200. I have no capacity for special contributions as my limited company is only 3 years old.

This year, I want to make an Employer contribution to a pension of €50,000 from the ltd company, which is over the allowable ordinary contribution I can make to the Master trust pension.

What are my contribution options in this case?

I am assuming that I should not exceed max funding calculation of €33,200 to the Master trust.
I am aware that there have been recent changes to how PRSA Employer contributions are treated. With these changes in mind, Can I use my existing personal PRSA to contribute the excess pension contributions of €16,800 directly from my ltd company and the full amount of 50K be treated as a Business Expense in the company year end accounts?

As there issues with the ltd company contributing to 2 separate pensions on my behalf in the same company year?

 

[AAAContributor]

This webinar may help with some of your queries - see from 33mins onwards:

Brokers Ireland Webinar: Pension Opportunities 2024

www.avivabroker.ie

Some of the discussion that is relevant to your queries:

- You can have an employer-sponsored PRSA & an Occupational Scheme (Master Trust).

- The employer can make an unlimited contribution to the PRSA.

- Clarification from Revenue is pending in regards to the technicalities but the view of the marketplace (the Life Companies) is that an unlimited employer contribution can be made to the PRSA BUT any such contribution may have to be taken into account in any overall limits check (at the point of retirement presumably) on the Scheme.

Perhaps it would be best to establish a "clean" PRSA for your employer contributions in connection with your current employment. Your financial adviser or pensions technical dept of your pension provider will be better able to advise as to the best route to take.

I have no capacity for special contributions as my limited company is only 3 years old.

Are you sure that there is a limitation here?

 

[KeenToLearn]

Thanks @AAAContributor for the reply and the link to the webinar.

I listened to the webinar at the point you suggested and the guidance was not clear. Its clear that the Employer can facilitate an occupational pension (My current Master Trust) and a PRSA for an employee at the same time, but its not clear how the funding limits for the occupational pension are impacted, or that's my interpretation from the Webinar.

I was hoping my query would have been a standard query at this stage with a standard industry agreed path forward, but it doesn't look like that's the case.

For me then it seems I have a 2 options,
1. Remain with the master Trust setup, stick to the funding limits that apply to me, and increase my Salary to in turn increase my funding limits. This is not my preferred path as I would prefer to maintain my current Salary and place excess company funds into a Pension.

2. Change over from a Master Trust Pension setup to a Employer sponsored new PRSA Pension. This would remove the Employer contribution limits and allow me to take my current Salary and contribute excess company funds to the PRSA. If I select this option, I will have to decide what to do with the existing Master Trust.

Any comment on my interpretation of my situation and options available?

 

[GSheehy]

I don't think that you'll have an issue putting the €50K into the Executive MT. Have you contacted the provider/intermediary about this?

Your original PRSA might have been an individual contract so it's likely that you will have to set up one in the company name if you want to go that route.

Gerard

www.prsa.ie