Occupational Pension Plans
A retirement plan for employees
It is a condition of revenue approval of an occupational pension scheme that the employer must pay a meaningful contribution to the scheme which can be either:
- not less than 10% of the ordinary annual contribution to the scheme, exclusive of any AVC’s or
- paying for the cost of establishing the scheme , the on-going operating costs and the cost of any death in service benefits.
There is no legal or revenue requirement that an employee contribute to an occupational pension scheme.
As contributions are tax deductible this is a Tax efficient way for employees to contribute to a long term Savings Plan and it is a tax efficient way for employers to reward staff rather than giving them pay rises, company cars or bonuses.
There are 2 main types of occupational pension schemes where a employer and/or employee agree to contribute a certain amount to the scheme to provide retirement benefits for the employee
- A defined benefit scheme, (DB)
- A defined contribution scheme (DC)
Defined Benefit Scheme
- A member is promised a pension and/or a lump sum at retirement related to their earnings or
- The scheme rules guarantee a particular level of investment performance on contributions paid to the scheme.
Defined Contribution Scheme
Contributions are invested and the accumulated fund is then used at retirement to provide the employee with:
- A lump sum, and
- The balance if any is used to buy an annuity which provides the employee with a pension in retirement
The scheme rules do not provide or promise any specific level of investment return as there is no guarantee on what the accumulated contributions will have grown to by retirement age.
Safe Life and Pensions Ltd
Registered in Ireland, Registration Number 508071
Address 9 Firgrove Park,
Bishopstown Cork City
Safe Life and Pensions Ltd is regulated by the Central Bank of Ireland