Benefits Of An Executive Pension

Starting an Executive Pension offers a range of benefits, especially for company directors and senior employees. These pensions are structured to allow both the employer and the employee to contribute towards retirement savings in a tax-efficient way.

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Here is a breakdown of the key benefits:

Tax Efficient Contributions

Employer contributions are not considered a Benefit-in-Kind (BIK) for the employee, meaning no income tax, PRSI, or USC applies to them.

Employer contributions are deductible as a business expense, reducing the company’s Corporation Tax liability.

Employee contributions (if any) can also benefit from income tax relief at the marginal rate (currently up to 40%).

Generous Contribution Limits

Executive pensions are not subject to the same personal age-related limits as personal pensions (e.g., PRSAs).

Employers can make large one-off contributions to “backdate” pension funding, subject to Revenue limits based on salary, service, and projected retirement age.

Tax Free Investment Growth

Investments within the pension grow free from capital gains tax and income tax.

Tax Free Lump Sum at Retirement

On retirement (usually between age 60–70), you can accept to 25% of the pension fund as a tax-free lump sum, up to certain limits (e.g., €200,000 tax-free, with a sliding scale of tax thereafter).

Flexible Retirement Options

After taking the tax-free lump sum, the balance can be:

• Transferred to an Approved Retirement Fund (ARF)

• Used to purchase an annuity

• Taken as taxable cash (less common due to tax implications)

Asset Protection

Pension assets are held in trust and are protected from company creditors, making them a secure way to extract value from a business.

Succession & Death Benefits

On death before retirement, the full value of the pension fund (subject to a tax-free limit of €200,000) can be paid to your estate or dependents.

After retirement, the balance of the ARF can be inherited, often with favourable tax treatment depending on the recipient. 

Business Exit Strategy Tool

Executive pensions allow company owners to extract profits tax-efficiently, especially useful when planning for business sale or exit.

Additional Benefits

Can include life cover via a pension term assurance policy (e.g. death-in-service benefit).

May also help in retaining key employees with attractive retirement planning options.

Contact us today and book your consultation and see how Quigley Financial Brokers can help you choose the best options available.