There are now a couple of options for executives, mainly Executive Pension Plan and PRSA.
An Executive Pension Plan is a type of retirement plan that is designed specifically for senior executives and key employees within a company. These plans often offer more generous benefits and investment options compared to traditional company pension plans and are used as a means of attracting and retaining top talent.
Executive pension plans may be funded by the company, the employee, or a combination of both and may include features such as higher contribution limits, accelerated vesting, and additional death and disability benefits. The specific terms and benefits of an executive pension plan will vary depending on the plan design and the employer’s goals.
Generous benefitsThese plans often offer more generous benefits compared to traditional company pension plans.Investment optionsThese plans often more investment options compared to traditional company pension plans.Reward top talentThese plans are used as a means of attracting and retaining top talent.If you have a question, or would like to know more about our services, please make an enquiry through our contact form or call us for a free consultation: 08724 07995. Either way, we would love to talk with you.
The PRSA now has several benefits over an Executive Pension Plan and Occupational Pension Scheme:
There is no lump sum limit payment limit on death in a PRSA while an occupational scheme is limited to a lump sum of 4 times final remuneration. The balance can be transferred to Approved Retirement Funds (ARFs) or an annuity for the beneficiary’s benefit.
PRSAs are not subject to caps on contributions while the occupational pension scheme is subject to maximum funding limits based on salary and service. However, the two-million-euro Standard Fund Threshold and the always important affordability should be kept in mind. It is also important to note that the Taxes Consolidation Act now seems to suggest that transferring an AVC into a PRSA will affect the ability of an employer to make BIK free contributions to that PRSA. As the changes are less than a month old, we have not seen this in practice yet, but it would be best to ensure that AVCs are not mixed with employer contributions to a PRSA until we have further clarification.
The use of multiple PRSAs allows for a phased retirement while all benefits related to an occupational scheme must be retired at the same time.
In normal circumstances the latest retirement age on an occupational pension is 70, while it is up to age 75 in a PRSA. Although there are major consequences if a PRSA is not retired before 75 that do not apply in an occupational scheme.
In an early retirement scenario, there is no requirement for a 20% director to relinquish their shares in a company, simply leaving employment will suffice.
The PRSA has clearly improved as a retirement vehicle and has now become a real competitor to the Executive Pension Plan and Occupational Pension Scheme, that will need to be at the forefront of any retirement planning decision.
No lump sum limit payment limitThere is no lump sum limit payment limit on death in a PRSA while an occupational scheme is limited to a lump sum of 4 times final remuneration.Not subject to caps on contributionsPRSAs are not subject to caps on contributions while the occupational pension scheme is subject to maximum funding limits based on salary and service.Retirement AgeIn normal circumstances the latest retirement age on an occupational pension is 70, while it is up to age 75 in a PRSA. Multiple PRSAsThe use of multiple PRSAs allows for a phased retirement while all benefits related to an occupational scheme must be retired at the same time.Early Retirement In an early retirement scenario, there is no requirement for a 20% director to relinquish their shares in a company, simply leaving employment will suffice.