What are Company Pension Plans?Financial Architects
Company Pension Plans are pension schemes for all the staff of a company.
They are established by the employers who deliver payments towards them on behalf of the company’s employees.
Investment in Company Pension Plans can deliver you:
- Tax-free retirement lump sum
- Lifelong pension
- Partner’s pension and an income for your dependents, in case of death during retirement
What about State Pensions?
Counting merely on the State’s elder pension may reveal to be a costly missed opportunity, as the higher your income, the lesser the share in pre-retirement incomes the National pension replaces. It is also important to notice that the Irish pension doesn’t turn payable until you’re aged 68. Consequently, if your plan is to retire at 60 years old, for instance, you won’t collect any national pension income during the next 8 years.
When is the best time for me to enrol in my Company’s Pension Plan?
About… now! For, as you grow older, the amount of contributions you’re able to do as well as the time span over which the Retirement Funds can be accumulated, decreases. The table below displays how a slight delay in opening your retirement plan will have as an outcome a demand for significantly more expensive contributions per month as you grow older.
Goal Retirement Income of €10,000 pa (in current inflation) at age 65
|Age 20||Age 30||Age 40||Age 50|
Contributions per month
What happens if I pass away before retiring?
The financial worth you’ve accumulated into Retirement Funds’ benefits will be accessible to your partner and/or dependants.
Similarly, if it’s comprised within your Company’s Pension Plan, Life Insurance may offer a death benefit lump sum cover and might even provide spouse or dependants’ pensions.
What if I retire earlier?
When your employer is in agreement, you can reap retirement benefits as early as your 50th birthday. However, the Retirement Fund in addition to the sum of retirement benefits for early retirements, will be cut compared to a normal retiring age.
Are Company Pensions tax-efficient?
Certainly, they are! You are eligible to total income tax relief for any Company Pension Plan contributions. Your employer will deduct those contributions directly from your wage before income taxes, so you obtain immediate tax relief with the highest available rate, as seen in the illustration below.
|Gross Monthly Contributions||NetMonthly Contributions||Tax Savings|
|40% Tax Payer||€200||€120||€80|
|20% Tax Payer||€200||€160||€40|
Keep in mind: Tax saving is measured on income tax release at the marginal tax rate
Tax savings then, are dependent of age Revenue limits on the contributions of:
|Age Attained in Year||% of Net Relevant Earnings*|
|30 to 39||20%|
|40 to 49||25%|
|50 to 54||30%|
|55 to 59||35%|
|60 and over||40%|
Benefits in Retirement
- Revenue today lets you take up to 2/3 of earnings upon retirement as a life pension – dependent on years of service as well as size of Retirement Fund.
- You can exchange a share of the pension income for a tax-free lump sum – by up to 150% of the full earnings at retirement – again depending on years of service and the amount of your Retirement Fund.
- The balance of the dues can be applied into purchasing a guaranteed lifelong income or obtaining an Approved Retirement Fund.
- You might also elect to provide the security of a partner’s pension for your surviving married person, in the misfortune of your death, by forsaking part of your pension income. In addition, you can assure the prolongation of your original pension by up to ten years from your retirement in the occurrence of your death.
Can I make additional contributions to increase the value of the Retirement Fund?
Yes, you can always consider additional contributions towards your Retirement Fund. This can be done via Additional Voluntary Contributions or AVCs. Yet, the total contributions you’re able to add to both AVCs, as well as your pension, are liable to Revenue limits, which one of our Company Pensions specialists will best advise you on.