Executive Pension Term Assurance
Executive Pension Term Assurance provides a lump sum amount for the family of executive employees in the event of their death while in employment before they reach retirement. It is a financial safety net so that if they are not around to provide for their family anymore, their family will be taken care of financially.
What is Executive Pension Term Assurance?
Pension Term Assurance is an occupational pension scheme, set up and normally paid for by the employer, so the premiums usually qualify for tax relief. If the employee dies before retirement, the lump sum amount can help their family survive without having the employee’s income to rely on. The cover lasts until the employee leaves employment or reaches retirement age, which will normally be their 65th birthday, (but it may be earlier/later) subject to Revenue terms & conditions.
Who can get cover with Executive Pension Term Assurance?
If an employee’s income is assessed for Income Tax under Schedule E, then this plan is suitable for them. They must be resident in Ireland and over the age of 18. The plan is set up by the employer under trust, the trustee is the owner of the plan, but it is the employee who is covered.
What are the tax advantages?
The employer pays the premiums for an Executive Pension Term Assurance plan. Premiums paid to the plan are not treated as income in the hands of the employee, so they are not taxed. Instead, the premiums are normally a tax-deductible expense for the employer, so premiums may be allowed as an expense against corporation tax, under current legislation.
Level Cover – The employer can choose a fixed amount as a lump sum for employees. The premiums payable on fixed amounts will also remain fixed or ‘level’. A fixed amount will help towards providing some financial security for the employee’s family should the employee die before their retirement.
Increasing Cover – The employer can choose for the premiums and lump sum to increase each year this is called indexation. This means the plan can financially protect the employee’s family against the impact of rises in the cost of living.
Conversion Option – At the outset, the employer can also select the option to allow for the policy to convert into another term protection policy, for up to the same lump sum amount. The employee won’t need to provide medical evidence if this option is exercised before the end of the term of the policy. You should speak to your adviser to make sure you fully understand the terms of the plan and up until what age you can convert the policy into a term plan.
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