IFG - Pensions, Investments and Advisory Services

Corporate FAQ

• What are the responsibilities of the Company (HR function) when it comes to providing a pension scheme?
• What legislation is an employer’s Pension Plan governed by?
• What is the difference between a Defined Benefit (DB) and a Defined Contribution Scheme?
• What is a Small Self Administered Pension?
• Why should I talk to IFG about my company’s pension scheme?

Corporate FAQ

What are the responsibilities of the Company (HR function) when it comes to providing a pension scheme?

A Pension Scheme, is a tax efficient way for a company to provide pension benefits for its directors or employees.

The company must make a contribution to the plan and can claim tax relief against its Corporation Tax liability.

A contribution from employees is optional but tax relief can be claimed at their highest rate and they can also reduce their PRSI providing their contribution is paid for through the payroll system.

A company pension plan is set up under a trust by the employer so that it is separate from the assets of the company. Death benefits or income protection benefits can be included in the plan. Contributions can be made on a regular basis or on a single premium basis.

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What legislation is an employer’s Pension Plan governed by?

Under the Pensions Acts 1990‐2002 Pension Plans are approved by the Revenue Commissioners as exempt approved schemes, under Chapter 1, Part 30 of the Taxes Consolidation Act 1997.

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What is the difference between a Defined Benefit (DB) and a Defined Contribution Scheme?

There are two types of company pension plans:

A:Defined Contribution Plan (also known as “money purchase” plan)

Defined Contribution plans provide benefits by using the value of the member’s individual retirement account at the time a benefit is purchased. The value of a member’s retirement account and the ultimate benefit depends on three main factors:

• The contributions paid into the account,
• The investment returns on those contributions, and
• The cost of purchasing the member’s pension using annuity rates.

Many company defined contribution pension plans also provide benefits should a member die in the service of the employer. These benefits are usually based on the member’s salary at death.

B: Defined Benefit Plan (also known as ‘final salary’ plan)

Defined Benefit plans provide members with retirement and death benefits based on formulae set out in the rules of the plan. Benefits are often based on a member’s salary close to retirement and on his or her pensionable service. For this reason these plans are sometimes known as “final salary” plans.

Many defined benefit plans are “integrated” with the State pension. This means that they provide a level of benefit that makes an allowance for the State pension. Typically this is achieved by using an offset from salary in respect of the State Retirement Pension. Many plans that 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 1.5 times the State Pension.

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What is a Small Self Administered Pension?

A Small Self Administered Pension (SSAP) is a corporate pension scheme with 12 or fewer members.  A SSAP is established under trust by your employer, for your benefit and the benefit of your fellow directors and key employees.

A SSAP provides a tax-efficient environment in which a company’s profits can be invested to provide retirement benefits for directors.  As the fund grows it can work for the member and still be free from creditors should the company go in to liquidation.

A SSAP gives company directors the opportunity to maximise their pension funds prior to retirement by giving them control over their investments.  Unlike other pension schemes the directors can control and choose their investments.
Essentially funds are transferred from your company to a new legal entity – a pension trust.  This trust is established for your sole benefit.  Transfers to the Trust are tax deductible in the company, so it helps reduce corporation tax.

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Why should I talk to IFG about my company’s pension scheme?

IFG Pension Investment and Advisory Services offer a full range of innovative pension services. Our primary aim is to help our clients understand pensions.

Across our 3 pensions divisions we offer a wide range of products and service to suit all out clients needs. Services that may interest your company include:

IFG Corporate Services offer:

• Retirement Planning and Scheme design
• Benefits Administration
• Investment Consultancy and Advice
• Online Pensions Portal
• Group PRSA’s
• Actuarial & Legal Services
• Risk Advisory Services
• Professional Trustee Services
• Trustee Training Services

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