Executive Pension Plans (EPP)
The assets and all that is invested in the fund is legally managed by a group of Trustees appointed by the company, protecting members in the case of default or company closure. If you choose to join the executive pension plan, you become a member of your company’s pension scheme. There are a number of benefits that you can avail of should you have the opportunity to invest in an executive pension plan:
- Ability to contribute a higher proportion of your income towards the plan:
The table below displays the maximum contributions you can make to a Personal Retirement Savings Account (PRSA) that are eligible for tax relief. In comparison, an executive pension scheme allows for a much higher proportion of your taxable earnings to be directed towards your retirement fund, enabling you to build up a larger portfolio of assets in a shorter period of time.
Source: Executive Pension Plan Ireland | Pension Support Line
| Male | Proportion of taxable income eligible for tax relief under an Executive Pension Plan (EPP) | |
| Current Age | 60 | 65 |
| 30 | 72% | 54% |
| 35 | 86% | 63% |
| 40 | 108% | 76% |
| 45 | 144% | 95% |
| 50 | 216% | 126% |
| 55 | 432% | 189% |
| Female | Proportion of taxable income eligible for tax relief under an Executive Pension Plan (EPP) | |
| Current Age | 60 | 65 |
| 30 | 67% | 49% |
| 35 | 80% | 58% |
| 40 | 100% | 69% |
| 45 | 133% | 86% |
| 50 | 200% | 115% |
| 55 | 400% | 173% |
| Male | Proportion of taxable income eligible for tax relief under an Executive Pension Plan (EPP) | Proportion of taxable income eligible for tax relief under a Personal Retirement Savings Account (PRSA) |
||
| Current Age | 60 | 65 | ||
| 30 | 72% | 54% | 20% | |
| 35 | 86% | 63% | 20% | |
| 40 | 108% | 76% | 25% | |
| 45 | 144% | 95% | 25% | |
| 50 | 216% | 126% | 30% | |
| 55 | 432% | 189% | 35% | |
- Tax relief opportunities:
- No USC or PRSI taxed on employer contributions:
If you are an employer and looking to make contributions to an EPP, you will be happy to know that contributions to the plan are not subject to benefit-in-kind for income tax purposes. This means you will have no income tax, PRSI, or Universal Social Charge liabilities on the company contributions.
- Ability to access a 25% tax free lump sum upon retirement:
Upon retirement, you are free to withdraw a lump sum of 25% of your fund’s value without paying tax. Alternatively, if you have worked for your employer for over 20 years, you are eligible to take out 1.5 times your annual salary as a lump sum when you retire. It is noteworthy that a tax threshold applies which will affect the amount you can claim that is not subject to tax. You can withdraw a sum of a value of €200,000 tax free. If your withdrawal exceeds this amount, you will be taxed at 20% up to €500,000, beyond which the tax rate applied on any lump sums taken out is 40% (plus PRSI and USC).
- Ability to access benefits from age 50 onwards:
If you are a member of an EPP, you are eligible to access your pension from the age of 50 if you choose to take early retirement. Other than this, the only instance in which you may access your pension before normal retirement age (between 60-70 years) is if you suffer from an illness or injury which deems you unfit and unable to work. In this situation, you will have immediate access to your funds, regardless of age.
*In the case of a 20% director of a company, early retirement at age 50 is only allowed if the director in question severs all links with the company by way of disposal of all shares held within the company. A disposal of shares to a spouse or child will not satisfy this requirement. However, the transfer of shares to an adult child who is currently working within the organisation is permissible*
