Executive Pensions for Company Directors & Company Pensions for Employees

State pensions have long since been recognised as not being adequate to provide sufficient income for you when you retire. Michael Hannon Financial Services will help provide you with the most suitable supplementary pension arrangements to ensure you enjoy a comfortable lifestyle during your retirement.

Pensions are long term savings plans which provide a fund in retirement to provide a fixed amount of income for life. The main differences between pensions and savings plans is that under pension plans you receive tax relief on your contributions, tax free investment growth and tax free cash at retirement.

Co. Directors pensions are hugely tax efficient for both the company and the director.

As independent financial advisors Michael Hannon Financial Services can look at all options available for your company and guide you through the process of setting up a scheme for you and your fellow Directors/employees.

There are considerable advantages of company Pensions including:

1. an enhanced capacity to fund greater than that available on personal pensions or PRSAs
2. employer contributions are tax deductible by the company
3. employee contributions are tax and PRSI deductible by the Director and employee at up to 47%

The Company must either contribute at least 10% of the over-all annual contribution into the Director's pension (exclusive of any AVCs) or pay for the cost of establishing the scheme, the ongoing operation costs and the cost of any death in service benefits. The Director may make personal contributions into the plan up to the individual's personal tax relief limits (see below).

The current Maximum tax relief limits are:

Age attained	Max contribution as % of NRE
Up to age 29	15%
30-39	20%
40-49	25%
50-54	30%
55-59	35%
60+	40%

It is also possible to add additional benefits to a company scheme for directors and employees, the most common of these are:

1. Death in service cover: in effect , life cover - which is usually arranged as a multiple of salary
2. Income Protection or Permanent Health Insurance (PHI): this provides an income to an employee or Company Director in the event of a long term illness or accident?

What happens at retirement?

Proprietary Company Directors (greater than 5%) have more retirement options than their employees (see employee section for retirement options). Co. Directors can take up to 1.5 times their final salary at retirement as a tax free lump sum subject to having enough pensionable service, and invest the balance in an annuity providing a fixed amount of income for life. If it is more beneficial, a Co. Director may take 25% of his accumulated pension fund tax free and invest the balance in an ARF/AMRF (See ARF/AMRF Section).

Employees in company pension schemes only have ARF options with any AVC contributions they have made.

You should contact Michael Hannon Financial Services to discuss these options in more detail with you.

Can Company Directors make Additional Voluntary Contributions?

Yes, company directors may want to save more than the minimum in order to boost their pension fund. Extra contributions are known as AVCs, or 'Additional Voluntary Contributions'. Only existing members of an occupational pension schemes can make AVCs. Contributions are made by the director in addition to a compulsory contribution payable under their main scheme.

The director is only eligible to continue making AVCs while they are an active member of the main occupational scheme linked to that employment. AVCs also qualify for full income tax and PRSI relief subject to the same personal limits mentioned earlier.

You can make an AVC in one of two ways; either by way of making an AVC into a AVC scheme set up by your company under Trust and governed by the rules of the main scheme or through a PRSA AVC in your own name.

Michael Hannon Financial Services will discuss the most suitable option for you.

Will AVCs improve my options at retirement?

One of the most important functions an AVC fund can perform for you is to provide extra tax free cash in retirement for you. You should discuss your options in more detail with Michael Hannon Financial Services.

You must normally take the benefits when you retire of any AVCs you have paid into your company AVC scheme, or into a separate Personal Retirement Savings Account AVC. It is possible that you could take part, or all, of your AVC fund as a tax-free lump sum. Any money left in your AVC fund, can be used to:

1. increase your basic pension
2. transfer into an Approved Retirement fund or Approved Minimum Retirement Fund (See ARF/AMRF Section)
3. take out in the form of a lump sum but this will be subject to income tax