Executive Pensions (40 second read)
The Executive Pension is a superb tax planning tool for self-employed Company Directors. After a brief hiatus it has recently been re-introduced to the market by four providers. This new iteration of the product will not look any different to you as a member but rather than being a one-member arrangement it will now be based on a master trust structure. This means that it will conform with the requirements of IORPS II without any additional costs for you.
Why is the Executive Pension such a good tax planning tool?
Current pension legislation allows a company to make very substantial contributions to an Executive pension established for your benefit, without you being subject to benefit in kind (BIK) taxation. These contributions are a fully allowable expense against corporation tax so they are a great tax planning opportunity. The company can also fund for the years you have missed and there is no PRSI liability for the company as a result of remunerating you this way.
The advantages of an Executive Pension are as follows;
- The contributions made by your company are deductible against trading profits in the accounting period in which the contribution is made*, thus reducing your corporation tax bill.
- Even though they are for your benefit, contributions made by your company to your Executive pension are not treated as a benefit in kind.
- Your company can back-fund for the years you have missed.
- There is no PRSI or USC liability for the company as a result of remunerating you this way.
- Your funds grow tax free within the pension
*the age related tax relievable amounts don’t apply to company contributions. Your company will generally have far higher scope to fund than you would have personally (see more information about how much you can have your company contribute to your pension in our Executive Pensions Frequently Asked Questions).
If you want to reduce your corporation tax bill and turn company funds into personal wealth we can help.
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Best Pension Advice is a trading name of Highfield Financial Planning, the most client focused financial services company in Ireland. We provide superior advice on Retirement Planning for all types of pension available in the Irish market. As Specialist Investment Advisers we can also help you to manage the investment of your pension to achieve your income objectives in retirement.