Directors Pension

What is a Directors Pension?

An Executive Pension is a company pension plan that is set up by a Limited Company for the benefit of Company Directors, Owners and Key Employees. It is designed to help Company Directors and Owners save for retirement while also remaining the most tax efficient way of extracting profits from the business into personal wealth.

How does an Executive Pension work?

Both employers and employees can contribute to the plan and avail of tax relief on the contributions. If you are a Director, the plan will benefit you significantly more than PAYE workers as you will be able to contribute a higher percentage of your income to the Pension.

How much can a company contribute to a directors pension in Ireland?

Usually the maximum amount that can be paid in will depend on a range of factors including, your age, salary, marital status, chosen retirement age, benefits from previous employment, and potential service/years of service (for example, if you have 10 years of service you could contribute 2/3 of your final pensionable salary in retirement).

This offers a massive advantage over PRSA’s and Personal Pensions as these plans are limited to age-related limits, whereas Executive Pensions are not.

What are the key Benefits?

  • Tax Efficient You can extract wealth from your business and move money tax free into your own name (while reducing your annual tax bill).
  • Contributions There is a much higher scope for contributions for Company Directors.
  • Flexibility Any contributions made by a company to a Directors Pension are flexible. You can increase your contributions, or make a one-off contribution, at any stage.
  • Tax Relief Your company gets corporation tax relief on the contributions made to the plan, and are also not subject to a benefit-in-kind charge in your hands for income tax purposes.
  • Security As a Director you can ring-fence company money in your own name and away from the business (and company Creditors).
  • Choice We offer a wide range of investment options, designed to meet your needs.
  • Early Retirement As a Company Director you can retire and claim the Executive Pension benefits as early as age 50. 
Executive Pension

When you retire

On retirement, you have two options on how benefits are withdrawn.

Option 1:

  • A once-off lump sum of 25% of the value of the fund, and;
  • The remainder of the fund must be used to invest in an Annuity or Approved Retirement Fund (ARF).

Option 2:

  • A once-off lump sum of a maximum of 150%, based on salary and service, and;
  • The remainder of the fund must be used to invest in an Annuity.

To note, a Company Director could retire and claim Pension benefits as early as age 50, with trustee permission, and where employment has terminated (no longer be an employee of the company). However, its important that you discuss the implications of an early retirement with a Financial Advisor before making a decision.


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