An executive pension is a defined contribution occupational pension plan, issued by a pension provider to an employer, with an employee/director of the company named as the beneficiary of the pension plan. The plan is held by the trustees on behalf of the employee/director. This type of pension can be set up for any employee or director of a limited company, but is typically set up for owner directors of small businesses. They can also be set up for senior company employees.
In order to gain revenue approval and qualify for valuable tax relief, the pension plan must fulfil certain requirements:
Any contribution made by the employer to the executive pension scheme is treated as a tax deductible business expense, up to revenue applied limits. Contributions made by the individual scheme member to his / her executive pension plan are tax deductible for the individual against net relevant earnings. The current maximum limits for income tax relief are as follows: The income limits above have capped to a maximum earnings ceiling of €115,000 since 2011. It is possible to backdate personal once off contributions paid in the current tax year, to the previous tax year, once the contribution has been made before Oct 31st. It also possible to carry forward any excess contribution made, in order to gain tax relief in future years. When you retire On retirement, you can take a tax-free lump sum of either: 25% of your fund, or, based on salary and service, to a maximum of 150% of salary. The maximum tax-free lump sum you can take is €200,000 (at July 2014). The remainder of your fund can then be invested in an Annuity or Approved Retirement Fund. (Hyper link these two so that when a client clicks on them they will jump to the relevant info on them)