Company pension plans, or occupational pension’s 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.
  A significant number of Defined Benefit plans make an allowance for the State Pension when providing a pension.  Typically this s achieved by using an offset from salary in respect of the State 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 11/2 times the State Pension.
• 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.

Joining a company plan

You should ask your employer if there is a company plan, what sort of plan it, and whether you can join the plan.

Each company pension plan has eligibility rules.  These rules set out who can join the plan, when they can join and the benefits available to them.  Some companies make it a condition of employment that employees must join the plan when eligible.

Many company plans automatically include employee for a lump sum death-in-service benefit immediately on joining the company (even if the employee cannot join for pension benefits or can only join for pension benefits at a later date).

Both full-time and part-time works are now being catered for following the part-time worker legislation being updated in 2001.  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.

If you are a member of an occupational pension plan you cannot take out an RAC or a PRSA, unless it is a PRSA to which you are making additional voluntary contributions or unless you have a separate source of earnings, i.e. a separate job or income.

Contributions

Members are often asked to contribute towards the cost of a company pension plan.  Contributions tend to be set as a percentage of salary.
In defied 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 leave needed to fund the benefits promised.

Additional Voluntary Contributions “AVCs”

AVCs are contributions that a member makes to increase retirement benefits.  AVCs are only permitted if the rules of the particular plan permit AVCs to be made.  If the rules do not permit AVSs to be made then a Standard PRSA must be offered by the employer for the purpose of making AVCs

If you have a plan which allows AVC’s and if the rules of the plan permit, you can use your AVCs to provide:

• All or part of the tax-free lump sum,
• Additional pension,
• A payment to an approved retirement fun “ARF” or and Approved Minimum Retirement Fun “AMRF”
• A taxable lump sum.

Tax relief

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:

For tax relief purposes, these contributions are capped each year.

You are not taxed on any employer contributions paid to a company pension plan.
Company pension plans provide benefits at the plan’s normal retirement age. Your pension will typically be based on your years in the company or plan and your earnings at retirement.  If you work in the private sector your options would normally consist of:

• A Pension
• A tax-free lump sum and a reduced pension.

If you work in the public sector, your plan would normally provide a fixed leave of pension and an additional tax-free lump sum.

Membership of a company pension plan ceases when you leave that employment.  If you have more than two years service you will be able to:

• Leave your benefit in the plan until you retire

Or

• Move or transfer the value of your pension benefits to another pension arrangement.

If you have less than 2 year service you may be obliged when you leave the service to take a refund of the value of your own contributions less tax at the basic rate. Some plans may permit you to leave your contributions in the plan, even though they are not required to do so by law. AVCs are treated in the same way as main plan benefits.Com