Executive pension vs personal pension

St1mpMeister

I'm starting a Ltd company (IT contracting) and have no personal pension setup yet so considering if I should go the Executive pension route vs a standard personal pension. It's just me operating in the company so all income will be available for personal use.

I'll be discussing this with a financial adviser, but to speed things up I thought to check here first to get some understanding of the benefits of either approach.

As I'm 40, the personal pension would have a tax relief of 25% of my monthly salary.
Do executive pensions also get tax relief?

My understanding is that with an executive pension there is no 25% limit and you can put as much as you like into a pension, but do they attract any more fees that offset any possible gains?


A few years down the road I may find that operating as a Ltd company isn't appealing any longer and I want to go back to permanent work. Could the executive pension be transferred into a standard pension at that stage?

Are there any pitfalls in having an executive pension that make it more hassle than it's worth?

Liam D Ferguson

An Executive Pension allows your company to make contributions that are outside of your salary. So, for example, if the total income / turnover of the company is €90,000, you could draw a salary of €60,000 and your company could put a pension contribution of €30,000 into an Executive Pension. Your salary remains at €60,000 for tax / PRSI / USC. (Simplified example - I know you'll probably have other expenses in your accounts.) With a Personal Pension your salary would be €90,000, you could put a pension contribution in (max 25%) and then you can only claim the tax back - not the PRSI or USC.

Employer contributions to an Executive are not completely unlimited. There are limits based on your age, salary and size of existing pension benefits. But they're far more generous than Personal Pension limits.

If you stop working through your company and join another company scheme, you can transfer your Executive fund into the new scheme. Or you can leave it where it is. You'd need to look at the relative merits of the two schemes at the time to decide if you want to transfer.

An Executive Pension scheme requires a trustee; a Personal Pension does not. Your company or you personally can be trustees. There are trustee training requirements but at the moment they're fairly easy to meet for a one-man scheme - read over a training booklet every two years. Or you can appoint a professional trustee - costs from about €5 per month.

Otherwise, charges on an Executive Pension should be the same as on a Personal Pension.

Your company can also pay for Income Protection for you as a tax-allowable business expense and if you're self-employed / contracting, this should be a priority as you won't have any sick-pay and if you're paying Class S PRSI as a proprietary director, you wouldn't even qualify for State Illness Benefit so you'd have nothing.

St1mpMeister

Food for thought, thanks for all that!

I'm assuming I can pay a lump sum into an executive pension rather than have to start now when I'm starting my Ltd ?

I'd prefer to go 6 months or so just to make sure it's all working out before setting up the exec pension.

Liam D Ferguson

I'm not sure I'm understanding the question correctly. If you're asking if the Executive Pension has to be set up at the same time as you're establishing the company, then no it doesn't. You can set up an Executive Pension any time you want. And if you've been putting money aside in your company bank account for six months earmarked for pensions, then yes you can kick off your Executive Pension with a lump sum.

Henry Ford III

Most importantly EPP allows early retirement from 50 onwards. PPP doesn't.