Company Pension/Group Scheme
Do the right thing, reap the rewards
Retirement Food for Thought…
- These days we’re all living longer. This means the average retiree can expect to enjoy two or even three decades of life after work. How will you fund this?
- You could have up to 2 000 extra hours a year to spend as you please*? Will you be able to afford to enjoy this time, or will it be spent worrying about money?
- The State Contributory Pension is currently around €1,005* euro a month. This can help – but will not be enough on its own to fund a quality retirement. Having your own private pension provision is the only way to secure the retirement years you deserve.
- Because of poor provision, more and more people retire without financial independence – having to rely on family members or simply going without even the basics. Are you on the road to being retirement-ready?
*Office for National Statistics Research UK.
*Monthly state contributory pension for a single person with a weekly means up to €30.00 (Department of Employment affairs and Social Protection 30/03/2018)
How it Works
A Group Pension Plan is a type of occupational pension plan that you, as an employer, set up within your company. Company employees become members of the plan and invest money to prepare for their retirement. The key difference between this and the PRSA, is that the plan is owned and set up by you as an employer, under Trust – and contributions are made by both employee and employer. Revenue makes it a condition that companies who have Group Pensions plans make ‘meaningful’ contributions into it (10% of total contributions).
As with all pension products there are significant TAX-SAVING benefits: both you as the employer, and your employee, will enjoy tax-relief on contributions, and when your employee retires they can receive 25% of their funds TAX-FREE.
A Group Pension plan can afford your organisation many important benefits:
- Significant tax-efficiency – all company contributions enjoy tax relief against corporation tax – for substantial savings.
- Protection for owners and directors – if you choose to, your executive team can be included on the scheme for death benefits – while keeping their pension planning separate from the company if they prefer. Company owners are able to channel the cost of life cover through the company.
- Attract top people – offering a good Group Pension Plan as part of your company’s benefits is an excellent way to entice quality people – and keep them. This can play a key role in your recruitment strategy.
- Show you care – a Group Pension Plan is an important way of demonstrating that you value the long-term well-being of your staff. This goes a long way to entrenching your position as a responsible employer.
- More motivation, more commitment – a work force that feels valued is one that will repay you with dedication and loyalty.
Quick Q and AQ. Who would be able to join our Group Pension Plan? A.This would be completely up to you and your company’s directors. You can decide on eligibility criteria, the terms and conditions of the plan and the value of the company’s contribution. Q. What tax savings on contributions do employees enjoy? A. The tax relief members enjoy depends on their age – as with normal PRSA. This applies to earnings up to a maximum of €115,000. However, the contributions you as an employer makes are NOT limited in this way – making this an extremely tax-efficient way to reward employees. Q. What happens when employees retire? A. In terms of payout, a member can take up to two-thirds of their earnings at retirement as a pension for life, depending on their years of service and the size of the fund. They can then exchange part of their pension income in return for a tax-free lump sum (up to 150% of their earnings at retirement). Q. What happens if an employee leaves the company? A. Your plan can be set up to allow for you as the employer to receive a refund of your contributions, should an employee leave the company within 2 years of joining. This can also help with staff retention as employees are more likely to remain with you for at least 2 years. Q. What else can be built into a Group Pension Plan? A. There are lots of opportunities to include additional protection in your plan. These might include the provision of a death-in-service cash lump sum benefit, the provision of a pension for a surviving dependant should an employee die in service, a disability benefit and premium protection.