Director Pension: SFT impact on Max Ordinary Contrib Calc

Hi all - does anybody know if the €2M limit needs to be incorporated into the calculation when arriving at the max Revenue ordinary contribution? I.e., assuming no retained benefits, if I earn a salary more than c.€92,600 does it increase the scope to pay higher contributions?

I realise that the fund is still subject to the €2M SFT on crystallisation, but pace at which I fund gives options which are attractive for many reasons.

Looking at Revenue Manual, I believe I can….but would be helpful if someone who has gone through this process could validate please.

thanks

Technically you are allowed to fund over €2m. The ultimate limit is the Revenue max benefit (overall pension of 2/3rds Salary + Spouses +indexation). So you can initially fund at that level, but limit contributions in later years to avoid exceeding €2m.

Perfect - that was my assessment too - thanks @Conan

@Conan One last question - in any one calendar year, is Rev Max funding based on total gross income drawn by the director from the company, or just the regular rate of basic pay? It will be my first year of trading so don’t have a 3 year average of total Sch E, which is ultimately what will drive max benefit calc. Just unsure as to what definition of earnings year 1 max contribs should be based upon. Thanks again

And a further build on above is if trading commences say halfway through the year (and my director salary commences then too), can I calculate the Rev max contribution by reference to the annualised equivalent of what I earned during that shorter 6 month period, and essentially pay a full-year employer pension contribution?

You submit 3 consecutive payslips to prove earnings on an annual basis. These can be weekly or monthly

Marc said:

You submit 3 consecutive payslips to prove earnings on an annual basis. These can be weekly or monthly

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Thanks @Marc - very helpful

NY_Resident said:

And a further build on above is if trading commences say halfway through the year (and my director salary commences then too), can I calculate the Rev max contribution by reference to the annualised equivalent of what I earned during that shorter 6 month period, and essentially pay a full-year employer pension contribution?

Click to expand...

Anybody know the answer to this question? What I am essentially asking is whether I can claim a deduction for a “full 12 month” employer pension contribution in my first calendar year of trading, though I will only have been taking a salary for 5-6 months as the business only commenced mid-way through the year. Thanks.