Executive pension advice

Pension advice

I work in a public service role(salary - 50k, current age 35) but also have a small limited company which I would like some advice about.
I don’t take any salary or dividends from the company and currently any money made in the company is reinvested back into stock and equipment. However I forecast that this will change in the near future- and I am considering the most tax efficient way of getting this money into my name,

I am wondering about the best way of getting this money into an executive pension? My thinking is to start paying myself a small salary (maybe 1k per month).I don’t want to pay myself more as of yet because I am already paying higher rate tax on my public service job. Then in about 5-10 years I could take a career break from my job and increase that salary to 3-4K per month.

If I then start an executive pension in 5 or 10 years, would the years on the lower salary enable me to make larger pension contributions? Looking at old threads on here I feel like this would but not entirely sure.


I will absolutely be getting professional advice- but just would like to have an idea of a plan before talking to anyone else.

Simple answer is YES. Your Employer (your Company) can contribute significant contributions to a Directors Pension Plan. If you draw a small salary in the initial years, but increase this salary in 5 or 10 years, then your company can base its contributions on your higher salary but take into account your total Company service. So deferring the start of contributing, will result in potentially higher contribution levels when the Company eventually starts contributing.

Thanks Conan. This is how I thought it worked but good to get some confirmation,

Can I ask what would happen if the new high salary was reduced subsequently? If after 3 years the salary was reduced back down to the level it was at before starting the exec pension- would the pension then be massively overfunded and how would this be resolved?

There are three definitions of Final Salary that can be used to calculate pension benefits. One of the definitions is:
- the average of total emoluments for any three or more consecutive years ending not earlier than ten years before retirement.
So you could reduce salary back as you get closer to retirement, so long as you satisfy the above condition. So you need to work out what Final Salary you need to take so as to best ensure you don’t overfund.

Thanks Conan.

Following up on this are executive pensions still an option for one man companies?

Dunelm said:

Following up on this are executive pensions still an option for one man companies?

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Executive pension or director's pension are just marketing names for a one-person occupational pension scheme, which are the ones that all the main pension companies have suspended offering recently. So no.

Thanks Liam , this was what I presumed but thank you for the confirmation.

So are there any options now?

Dunelm said:

Thanks Liam , this was what I presumed but thank you for the confirmation.

So are there any options now?

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For those who don't have access to a group pension scheme or an existing one-person scheme, the choices for contributions are a Personal Pension or a PRSA. Contributions to either will only qualify for tax relief in a particular year if the contribution is no more than the relevant age-related limit. (25% of salary for someone in their 40s, maximum salary €115,000.)