Pensions FAQ

If you have any further questions please feel free to contact us on 064 6631274 or email: info@coyneculloty.com

When is the best time to start a pension?

You should start providing for your pension immediately. The longer you leave it the more it will cost it’s as simple as that. The longer you have been investing into your pension fund the more money you will have at retirement, allowing you to maintain your standard of living and enjoy the rewards of working for so many years. You will need to look at your current outgoings and see what you can afford to put away and review regularly as your circumstances change.

What are the benefits of starting up my pension?

You are entitled to income tax relief on your contributions into a pension plan. This means that the government will not tax money being paid into a pension plan so long as it does not cross certain limits. The growth you make on your money while it is invested is also tax free. Knowing you are providing for your future will also give you peace of mind.

Is my company responsible for selling up my pension?

There is no legal obligation on a company to set up a company pension plan. If a plan is in place each company pension plan has eligibly rules, these rules set out who can join the plan, when they can join and the benefits available to them. In the past many company pension plans only catered for full-time employees. However following part-time worker legislation in 2001 this is generally no longer the case.

All employers are required to have entered a contract with a PRSA provider so that access to at least one Standard PRSA is available for all “excluded employees”.

What happens if I leave my job?

Membership of a company pension plan ceases when you leave that employment. If you have more than two years Qualifying Service, which normally means two years in the plan as a member for pension purposes, you will be able to:

• Leave your benefit in the plan until you retire (known as a deferred or preserved benefit).
• Move or transfer the value of your pension benefits to another pension arrangement.

What happens if I am made redundant?

Assuming your pension scheme is an Occupational Pension Scheme (“Company Scheme”) you have the following options:

• Leave it in the current scheme, where it will continue to be invested, and then draw your benefits at retirement. You will need to contact the scheme trustees when you want to retire.
• Transfer it to another Occupational Pension Scheme if you are/become a member of another one.
• Transfer to a Personal Retirement Bond (“Buy Out Bond”) with a provider of your choice, You choose the provider and the fund and have control over the investment of the pension fund thereafter.

Is my pension protected if my company goes into liquidation?

The assets of your pension plan are totally separate from the assets of the company and completely safe. In most cases if a company goes into liquidation the company pension plan will be wound up. The trustees of the pension plan are responsible for winding up the pension plan, according to the rules of the plan and current law. You have a number of options that are similar to those available to you if you leave the company but they do depend on the terms of the Pension Plan winding up.

Do I contribute and how much should I contribute

Members are often asked to contribute toward the cost of a company pension plan. Contributions tend to be a percentage of salary. In a defined contribution plan the employer’s contribution is set out in the plans documents. In a defined benefit plan the employer normally pays contributions at the level needed to fund the benefits promised.

Your contributions to a company pension plan will normally be paid through payroll. As a result you will receive immediate and automatic tax relief together with relief from PRSI and the health levies. You do not have to claim this relief. The maximum contribution rate (as a percentage of total pay) on which you can receive tax relief is:

Highest age at any time during the tax yearrate
Under 3015%
30-3920%
40-4925%
50-5430%
55-5935%
60 and over40%

For tax relief purposes these contributions are limited to earnings up to a maximum of €115, 000 in any tax year.

What is an AVC (Additional Voluntary Contribution)?

AVC’s are contributions that a member makes to increase retirement benefits. AVC’s are only permitted if the rules of the particular plan permit AVC’s to be made. If the rules do not permit AVCs to be made then a member has the right from 15 September 2003 to pay AVCs to a Personal Savings Retirement Account (PRSA). AVCs qualify for tax relief at the highest rate of tax, you can actually reduce your income tax payments now, while you avail of a good investment opportunity. In addition any investment returns recorded are also tax free. In summary, you pay less tax now, and enhance your financial security for your retirement.

Because AVCs qualify for tax relief at the highest rate of tax, you can actually reduce your income tax payments now, while you avail of a good opportunity. In addition any investment returns recorded are also tax free. In summary, you pay less tax now, and enhance your financial security for your retirement.

Can I retire early?

Most company pension plans in the private sector permit members to retire early with the employer’s and /or trustees’ consent from age 50 onwards. Many plans allow members to retire due to ill-health at any age.

With a defined benefit plan early retirement benefit re normally lower to allow for the additional cost of paying benefits early and for a longer period. With a defined contribution plan the fund available to provide your benefits would be lower on early retirement (as fewer contributions will have been paid and those paid would be invested for a shorter period). In addition, the cost of buying your pension would be more expensive.

What happens if I need to retire as a result of ill health?

Once you get approval from the Revenue Commissioners, your employer and the trustees of the scheme you can retire early on the grounds of ill health and take your pension benefits immediately. Your pension may be lower as your contributions have ceased at an earlier age and the pension will have to last longer as you will be retiring early.

Am I still entitled to a State Pension if I am part of a company pension scheme?

You will get the State Pension as well as your own private pension when you retire, provided you have made the required number of PRSI contributions throughout your working life.
The state pension age will be increased gradually to 68 years. In 2014 State Pension age will move from 65 to 66. It will then be increased to 67 in 2021 and 68 in 2028.