FAQs
What's the difference between a Company Pension and a Personal Pension?
What role does the Trustee play in a Company Pension?
When can I take my retirement benefits?
What happens if I have to retire early due to ill-health?
Is there any limit to the pension fund I can build up?
What happens to my fund if I die?
What's the difference between a Company Pension and a Personal Pension?
If your company is contributing to your pension it will usually be set up as a Company Pension plan. This means that the pension scheme is set up under a trust, with appointed trustees. The trust separates the pension fund from the company assets and protects it from company creditors. So if the company goes into liquidation the pension fund is protected. The funds in the pension scheme must be used solely for the benefit of the members of the pension scheme.
If you work for yourself, and your business is not incorporated, or your employer does not have a pension scheme, your pension has probably been set up as a Personal Pension. This means that you own it outright and can instruct us on all aspects of it.
The rules about how much can be contributed to a pension plan and your options at retirement are different for Company and Personal Pensions. See the question below in relation to this.
What role do the Trustees play in a Company Pension?
The role of the Trustees of a Company Pension plan is primarily to ensure that the scheme is properly administered and that the funds are used solely for the benefit of scheme members. As the Trustees technically own the pension we will usually require their instructions to make changes to the plan.
When can I take my retirement benefits?
If you have a Personal Pension plan, the earliest you can take your retirement benefits is at 60 years and the latest is at 75 years. For Company Pension plans the rules are slightly different - ask your financial adviser for more information about this.
What happens if I have to retire early due to ill-health?
If you have to stop work due to serious ill-health you can usually take your retirement benefits as soon as that happens. However, if you haven’t been contributing to your pension plan for long then the fund is likely to be small and the benefits low.
If you have Income Protection cover this will pay you an income if you can’t work due to illness or injury. This gives you more time to build up your pension fund and your Income Protection premiums qualify for tax relief. Ask your financial adviser for more information about this.
Is there any limit to the pension fund I can build up?
The Revenue sets an overall maximum pension fund size which is adjusted annually in line with an average earnings index. This limit applies to both Personal and Company Pensions.
A further limit is imposed on Company Pensions in that the fund built up cannot be greater than that required to purchase your ‘maximum benefits’. Maximum benefits will depend on your final earnings, how long you have been working in the company and if you have dependants. Ask your financial adviser for more information about the maximum fund allowable for your particular circumstances.
What happens if I change job?
With a Personal Pension plan you simply continue to make your contributions in the same way. However, if you join a new employer's Company Pension scheme, while you can continue to make contributions to your Personal Pension plan, you cannot claim tax relief on these contributions.
If you have a Company Pension plan and you move to a new employer, you must stop contributions to your existing Company Pension plan. You can request that the fund you have built up there be transferred to your new employer's Company Pension scheme (if you have joined), to a Personal Retirement Bond, or in some circumstances to a Personal Retirement Savings Account (PRSA).
What is an Annuity?
When you retire one of your options is to use your pension fund to buy an Annuity from a life company. This Annuity then gives you a guaranteed pension income for the rest of your life.
When you buy an Annuity you can choose a pension income that remains level or one that increases every year. If you have dependants you can choose for the pension to be paid to them after your death for a fixed time or for the rest of their life. You can find out more about your retirement options by clicking here.
The amount of your Annuity depends on the size of your pension fund, the options you choose and the general level of Annuity rates at the time you retire. If you have a pension with Friends First or any other provider you are not limited to purchasing your Annuity from your pension provider. You should speak to your financial adviser about getting the best Annuity rate available on the open market.
What happens to my fund if I die?
If you have a Personal Pension plan, the value of your fund is passed over to your dependants as part of your estate. If you have a Company Pension plan, the Trustees can use their discretion to pay the value of the fund to beneficiaries of the scheme. You can advise the Trustees who those beneficiaries should be and the Trustees will usually respect your wishes.
In the early years of your pension plan your fund is likely to be relatively small. This is why it's important that you arrange Life Cover to provide for your dependants in the event of your death. You can arrange Life Cover through an Executive or Self-Employed Term Assurance Policy and benefit from tax relief on your premiums. Ask your financial adviser for more information about this.
