Executive Pension Plan

W

WillGilbert

Guest
Is an Executive Pension Plan the same as a PRSA , but with greater Limits and suiotable for Company Directors.

I own a company with a lot of cash sitting in the bank Say €100,000 for arguments sake, and I want to put this into a pension.

A PRSA or other pension does not seem to be Tax Effective , as the mas that can be Tax Relieved is (say for a 50 year old) about 30%
I understand that some of the other Pensions, If I (or my Company) contributes, there will be a BIK of any amount over the 30 %.

With an Executive Pension Plan, this does not seen to be the case as the company can contribute c 250% , without any BIK implications whatsoever.

Is the above correct.
 
Hi Will
  • Executive Pension is not same as PRSA
  • The main difference is that PRSA has % limits on contributions (max of 40% for person >60) whereas an Executive Pension (like any occupational pension) has max only applying to pension eventually taken
  • This means that for a person with >10 years of service in the company they could get a pension of 2/3rds of salary at retirement age, for a salary of (for example) €100k this might mean a pension fund in excess of €2million, so it may mean contributions of 200% or 300% or even more of salary by the company
  • In short, yes it is a far more efficient way of getting money out of company than a PRSA if you want to target large benefits over short term
 
CapitalCCC said:
  • The main difference is that PRSA has % limits on contributions (max of 40% for person >60) whereas an Executive Pension (like any occupational pension) has max only applying to pension eventually taken
Click to expand...
Are you sure about this? Depdending on age bracket you can contribute a maximum of between 15% and 40% to a PRSA and claim tax and PRSI/health levy relief on the full amount but as far as I know you can contribute more than that (subject to the normal funding rules) although you don't get relief on it (which probably means, in practice, that most people wouldn't bother). See .
 
Hi Club

With an Exec Pension the individual may still only put in 15% up to 40% age related...but the scheme actuary to Exec Pension can calc the 200% or 300% max contribution rate that I mentioned and THE COMPANY can put in the "gap" between what the individual puts in and the max rate (for example company could put in 185% if actuary calculated 200% and individual put in 15%).

With a PRSA of course you can put in as much as you like but only up to 40% (for someone > 60) will get tax relief.

With Exec Pension, all 300% or 200% or whatever can get tax relief.
 
CapitalCCC said:
(for example company could put in 185% if actuary calculated 200% and individual put in 15%).
Click to expand...

Hi CapitalCCC,

Do you know if the director needs to pay that 15% from their own funds (they can claim tax relief I know) or can the company pay the full 200%?
 
Hi brouhahaha

Absolutely no problem if company pays the 200% if it is the preferred route - of course the 200% would have to be calculated by actuary to the plan first (for example, 200% would not be allowable for a 30year old...it might be for a 55 year old).
 
I am unclear as to limits etc on an Executive pension lan.

What are the Limits for putting money in
What are the limits for taking the Pension.
What happens if the company ceases trading or the individual leaves the company?
 
  • Contribution limits are based around maximum benefits - 2/3rds of final salary for a 10 year career with the company to normal retirement
  • Benefit limit based on service - max is 2/3rds of salary (as above, needs 10 year career with company to normal retirement)
  • Company ceases trading then no more contributions to plan, it can remain in paid up form
  • If person leaves company then no more contributions to plan, it can remain in paid up form or be transferred to new employment
 
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