The Facts
· Only 59.8 % of the adult Irish workforce between 45-54 years of
age, currently have
private pension coverage.
· 53.2 % of women in the Irish workforce DO NOT have private pension
coverage.
A man retiring at 65 now can expect to live to 83 and a woman retiring
at 65 can expect to live to 87! It takes a long time to save for
retirement and the earlier a person starts to contribute to a pension,
the better.
Company Pension Plans
Company pension plans, or occupational pension plans as they
are sometimes known, are set up by employers to provide retirement
and death benefits for their employees. There is no legal obligation
on a company to set up a company pension plan. These plans are normally
set up either under trust or on a statutory basis. Statutory plans
are set up by legislation and provide benefits for employees in
the public sector or semi-state bodies.
Types
of company plans
There are two types of company pension plan:
Defined benefit plans provide
a set level of pension at retirement, the amount of which normally
depends on your service and your earnings at retirement.
Defined Contribution plans,
where your own contributions and your employer's contributions are
both invested and the proceeds used to buy a pension at retirement.
The level of your pension will depend on the amount invested, the
return on your investments and the cost of your pension at retirement.
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. Employers must now provide
prorate benefits for part-time employees who work at least 20% of
the time worked by a comparable full-time employee, unless there
are special circumstances whereby part-time employees need not be
included.
New
legislation in 2003 in respect of fixed term employees means that
in many cases employers will need to make their company pension
plans available to such employees. Many plans aim to provide 2/3rds
of a member's basic salary after 40 years' pensionable service calculate
the pension entitlement on the member's basic salary less 11/2 times
the State Pension.
Contributions
Members are often asked to contribute toward the cost of a company
pension plan. Contributions tend to be set as a percentage of salary.
In a defined contribution plan the employer's contribution is set
out in the plan's documents. In a defined benefit plan the employer
normally pays contributions at the level needed to fund the benefits
promised.
Member contributions
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 year |
Rate |
| Under
30 |
15% |
| 30-39 |
20% |
| 40-49 |
25% |
| 50
or over |
30% |
For tax relief purposes these contributions are limited to earnings
up to a maximum of €254,000 in any tax year.
Employer contributions
You are not taxed on any employer contributions paid to a company
pension plan.
AVC - You would benefit from independent advice on Additional Voluntary
Contributions's
as your employer will normally only recomend the existing scheme.
Don't forget its
your money - choose your own outcome
Investments
All funds invested in a company pension plan roll-up free from income
tax and capital gains tax.
Investment of contributions
If you are a member of a defined contribution plan you may be provided
with a range of investment options. You should carefully review
the information provided on any option offered before making any
decisions. It is important that you periodically review any investment
decision taken, especially in the years running up to retirement
as you may wish to protect any investment gains made.
If you are unsure about your Pension - give
us a call and we will give the best advice that we can to you.
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