Directors Pension

[user180224]

I'm the sole director of a small Irish ltd company, making a profit of around €800 per month. It basically looks after itself so worth keeping going.

My main income is a PAYE job which I max out my pension contributions on.

I believe I can set up a Directors Pension for the ltd company and ideally put €500 per month into the pension tax free. I would plan on not drawing a salary from the ltd company. Is this all above board and should it be straightforward to set up?

 

[Steven Barrett]

Yep, it has to go into either a master trust or a PRSA. Either one is fine.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Dave Vanian]

Although there is some debate about this, my view is that there must be a salary paid, even a very small one, in order for there to be an employer / employee relationship.

 

[user180224]

Interesting, I always thought director was seperate to employee employer relationship. When you say very small one, could i get away with a nominal €1?

 

[Dave Vanian]

Interesting, I always thought director was seperate to employee employer relationship.

It is, but pension legislation requires there to be an employer / employee relationship and it is my view (and that of others working in the pensions industry) that a salary is a necessary part of this.

When you say very small one, could i get away with a nominal €1?

By the letter of the law, yes. This would only work for a PRSA, not a Master Trust. Employer contributions to a Master Trust have limits related to salary. While the limits are generous, a generous percentage of €1 is still a very small figure.

I'm always wary of those who fly too close to the sun. Yes you can get away with paying a salary of €1 and a pension contribution of many times this. But there is the possibility that Revenue might have a look in the future to see if this was a genuine employment. I'm old enough to remember many things that were very popular and many people got away with for years ... until they didn't. Offshore bank accounts. Employees being categorised as contractors. Non-working spouses being "employed" by a business. My suggestion, for what it's worth, would be to split the salary and pension 50/50. I'm sure some would disagree with this suggestion.

 

[user180224]

Okay, I appreciate the advice, just fed up seeing 52% of my additional income gone. There are no employees currently, I do the little work required.

At this point probably just makes sense to close the company if I've to pay a salary to avail of pension savings

I wish revenue would just be clear instead of leaving open loops holes / things to interpretation