Ltd. Company director - pension vs. corporate investment

micramblin

Registered User
Messages
5
Hi,

My business partner and I are in the process of setting up an Executive Pension Plan at present. (one of us late 30's, the other is 40 - no pension at present).
My original plan was to start putting in around 1k a month into an EPP but after getting some advice it was suggested we should perhaps look at putting a smaller amount into the pension (e.g. 400 per month) and put 1k a month into a corporate investment account instead.
Both would be invested in a Zurich Fund (Dynamic).

The EPP amc is 1% per annum.
The corporate investment a/c amc is 1.5% per annum.

Both via the same broker.

Aside from the fee difference (which is based on the assumption that funds in the corporate a/c are free to move at any time), I'm curious as to what others think of this as an approach?

My primary objective is to get cracking on the pension asap given we're both a bit late to the party on that front. But I do like the idea of being able to access funds via the corporate a/c if we ever needed it for cashflow reasons etc.

I'd also love if someone could explain to me the tax implications of this a bit better. i.e. I'm aware of the 25% exit tax every 8 years on gains - on the face of it that would make it seem like a bad idea given we wouldn't pay the 25% exit tax every 8 yrs. on the pension.

We also intend to prob do one off lump sums each year depending on company performance etc.

Our preference is not manage this ourselves given we're time poor and therefore happy to use a brokerage for this, but would appreciate any valuable insights on this general approach and any thoughts on the fees.

Thanks.
mic.
 
Not sure why you are considering a “corporate investment account”? Why would you set up a “company owned savings account” ? Even if you do €1k per month into the EPP, you can reduce/stop this contribution if the Company cash flow required it.
 
Thanks for the feedback Conan.

The rationale as it's been explained to me would be that say we had 100k saved in this savings account and hit financial difficulties, we would have the option of dipping into those savings (where we assume they've hopefully been getting decent returns as opposed to leaving them sit in our current account earning next to nothing/negative interest). If we had put that same 100k into the EPP we can't touch it until retirement - so flexibility to access funds was one reason I was given.

(sidenote: my skepticism is one reason why I started this thread! But I also do like that flexibility).
 
By whom?

Your accountant or tax advisor should be advising you on how to use the corporate profits and what the implications are.

Brendan

Hey Brendan, by a financial advisor.
I'm also going to be speaking to our accountant about this for sure - but our accountant wouldn't be the most proactive when it comes to recommending investment options.

I'm asking as many knowledgeable people as I can find what they think of this approach before making a decision - hence why I came here

mic.
 
If the company may need the cash, don’t tie it up in pensions, but if it won’t, pension the lot.