Pensions Guide

Pensions Guide

A very important consideration to save for your future and also to compliantly pay less tax is to utilize a pension type plan. There are 2 options available based on whether you use a PAYE Umbrella structure OR a Personal Limited company. With both options Accounting Pro will assist you with setup and contributions with our IFA partners.

PAYE Umbrella (PRSA) –

A PRSA is a pension contract between a contractor and a PRSA provider. It is an easy way to save for your retirement. You can make regular or 1 off payments. It is flexible, can be contributed to in and on/off or irregular manner and is transferable. There is significant tax relief from employing a PRSA. You can contribute large sums however income tax relief is only available on amounts up to a fixed percentage of net earnings on a scale depending on the contributors age.

Personal Limited Company (Executive Pension) –

Firstly, an Executive Pension is a one member Occupational Pension Scheme or Company Pension Scheme for an individual employee or director. An Executive Pension is allowed to accept/make pension contributions from the company i.e. an employer contribution. Employee contributions to an Executive Pension are also possible. Employer contributions can be written off fully as a tax deductible expense in the P&L (profit & loss) account. In other words it can be written off for Corporation Tax & Income Tax/USC/PRSI Tax at source each year and there is an option to fund to provide for back service. Depending on your personal circumstances a company could pay in higher levels of pension contributions into an executive pension than a normal self-employed pension.

In principle, a contractor can reduce their tax bill up to 50% by employing an executive pension.