Owner Director Pensions

(Suitable products typically include Executive Pensions & Self-Directed Pensions)

Flexibility for Owner-Directors

If you are a business owner, you may have sacrificed starting your retirement plan early, because of the time, effort and financial resources needed to make your business profitable.

When your business becomes cash rich and you want to draw on those profits, you may be faced with a substantial income tax liability if you draw these profits as personal income.

Instead, ensure your company funds your pension when it is "cash rich"

The Government has recognised that businesses are not profitable all of the time, and that owner/directors, or their companies, may not be able to make regular contributions to their retirement plans. To compensate, companies may concentrate pension contributions to a director's occupational pension over a shorter number of years.  This allows for a more practical funding arrangement, where a company pays into the director's occupational pension plan when it can afford to do so. In the years when a company is profitable, it can therefore make large contributions to a director's occupational pension plan (within certain funding limits), without the director incurring any tax liability.

For example, a company may pay up to 337% of a 55 year old owner/director's salary* (on top of the salary they've already drawn) into that director's retirement fund, without the director incurring any personal tax liability. So if the director has drawn a salary of EUR100k, the company may also contribute another EUR337k of company profits into that director's personal retirement fund, without the director incurring a personal tax or PRSI liability! The company may also claim corporation tax relief on the contribution it has made to the director's occupational pension.

* Source: Hibernian Life & Pensions funding guidelines 2007 (assuming client is a married male, retiring at age 60 and has at least 10 years service).

It pays to start your pension early and get the full benefit of investment growth.

AIB has a full range of Personal, Executive and Self-Directed Pensions to meet the current and future financial needs of owner-directors.

This information is based on AIB's understanding of current law, tax and Revenue pratice, September 2008.

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