💡What is a Company Pension?

A Company Pension (or Occupational Pension Scheme) is a pension plan set up by an employer to provide retirement benefits for its employees. The company usually defines the rules of the pension scheme and appoints trustees to manage it responsibly.

Employees benefit from tax-free pension contributions, your contributions are deducted from your salary before income tax is calculated, reducing your taxable income.

There are two main types of company pension schemes:

1. Defined Benefit Scheme

Under this scheme, the pension income or lump sum you receive at retirement is linked to your final salary and years of service. For example, you might receive up to half or two-thirds of your final salary after 40 years of service (including the State Pension).

2. Defined Contribution Scheme

Also known as a money purchase scheme, this plan builds up a pension pot over time.
Your final pension depends on factors such as:

• Your contribution levels
• The investment performance of the pension fund
• Your attitude to risk

Can My Pension Be Taken Away?

No. Pension schemes are protected under an irrevocable trust, meaning the company has no direct access to the funds. However, in defined contribution schemes, there is a risk that the fund could be underfunded, and the company may not be able to provide the full expected benefits at retirement.

What Happens to Company Pensions When You Leave?

When you leave your job, you usually have three options:

• Leave it where it is – The pension stays with your previous employer.
• Transfer it to your new employer’s scheme.
• Move it into your own name, This is known in Ireland as a Personal Retirement Bond (PRB) or Buyout Bond.

Can I Add More Than the Stated Amount?

Yes. You can make Additional Voluntary Contributions (AVCs) to boost your retirement savings.
These contributions:

• Build an additional retirement fund, within Revenue limits.
• Can also provide extra death-in-service benefits for dependents.

What Is Death in Service?

Death in service provides a lump sum payment if an employee dies while employed.
Typically, this benefit equals up to four times your salary, though it can be higher.
If there are dependents, any remaining balance may be used to purchase an annuity (a regular income for dependents).

Are There Payments After Death in Retirement?

Yes. Depending on the pension scheme, 50% of the original pension may continue to be paid to a dependent if an annuity option was selected at retirement.

Conclusion

If you own a company and use it to fund your retirement, note that upcoming regulations may require employers to offer company pension schemes and make contributions on behalf of their staff.

If you’re an employee already in a company pension, consider making AVCs to enhance your future benefits and retirement security.