Since the burdensome IORPS2 requirements were enforced by the Pensions Authority in July 2022, a lot of pension compliance needed to be mapped out. However, with the emergence of the Master Trust Product in late 2022 and the recent removal of BIK on company contributions into PRSA, company directors now have massive scope to withdraw money tax efficiently from their business by using this pension vehicle. Avoid paying Corporation Tax, Income Tax, PRSI, USC, BIK by setting up your own Directors Pension.
One Man Scheme – Executive Pension:
This structure is well suited to the busy company director, who prudently wants to save for retirement tax efficiently, with minimal interruption to day to day business activities. You concentrate on your business and let the a fund manager concentrate on your pension. Here, your pension assets are pooled into a fund or funds which matches your risk profile, which can be reviewed at intervals with your broker at your discretion. If you do not wish to be actively involved in investment, a life insurance company arrangement may be sufficient
SSAP- Small Self Administered Pension:
This form of pension is suited to an experienced investor who wishes to take control of their own pension fund. In a lot of cases, the pension holder will have sizeable pension benefits to transfer into this arrangement. The fund can be used to invest in property, stocks, ETF etc as well as funds. Assets are not held in pooled accounts and are readily visible for each client. With this arrangement, IORPS regulation have restricted property investment, whereby lending is disallowed and property being an unregulated assets cannot ever amount to 50% or more of total assets in the SSAP. Henceforth, its atractiveness has dimininshed for those interested in unregulated investment.
PRSA
Last years Finance Bill brought out a piece of legislation which was a game changer for PRSA. The removed of BIK effectively meant that now a company direct with no previous pension funding could fund for up to €2 million into a PRSA, which is the pension cap. This is benefical to business owners on small salary and limited service as these cannot create a restriction like with other company pension arrangements. This has opened the door for company owners to make large contributions via a PRSA into their preferred pension arrangement. Property purchase is very viable without a mortgage meaning investors see rents coming into their pension free of tax and any future sale of the property withoin the pension is free of capital gains tax.
What are the benefits?
- Company contributions are a fully tax deductible expense.
- Your initial investment potentially increases 100% straight away as opposed to if you made same investment outside of the pension vehicle.
- The growth of your fund is exempt from DIRT or growth taxes too.
- Tax free lump sum options at retirement
- Potential access to fund from age 50
- Value is paid to estate in event of death before retirement. Different rules apply to different structures.
