John Ellis

Your Money & You

John Ellis Pensions, company profits... and private wealth

After all the recent upheaval in the pensions market with the embargo being put-on one-man pension schemes by the pensions authority, insurance providers have at last put in place executive pension arrangements under what is called a Master Trust.

Executive pensions continue to be perhaps the most tax e cient method of providing pension bene ts for company directors, family members employed in the business and other key employees. In the case of company directors and spouses employed in the business employer pension contributions to an executive pension are an extremely e ective mechanism for tax e ciently transferring pro ts from the business into “personal wealth”.

Where a company has excess pro ts, which the directors wish to transfer to themselves, it is often more tax e cient for the company to make an “employer pension contribution” to an executive pension. e advantage being no personal tax liability for the recipient which would be the case by way of salary increases, bonuses or dividends. e company will get tax relief on the contribution at the corporation tax rate, currently 12.5%. Furthermore, the growth on the contributions within the pension will not attract Capital Gains Tax, DIRT, Exit Tax and on retirement the employee/director can take a lump sum which is tax-free up to €200,000.

As you may be aware, the self-employed are restricted to the amount they can invest into a pension arrangement. Not so with Executive pensions — employer contributions are not restricted by age related limits. Instead, they are costed on providing retirement bene ts based on two thirds of salary leading to very generous contribution amounts.

Another bene t is contributions are allowable as either “Ordinary Annual Contributions” or “Special Contributions”. is can include all employer, employee and additional voluntary contributions made to the scheme in the company accounting period.

For example, Deirdre is 35 and married and has a salary of €50,000. She has a personal pension valued at €100,000. She wants to maximise her pension contributions now. Revenue limits for her age will allow her to make to a personal pension a contribution of €10,000 (20% x €50,000). However, under an executive pension plan the company could make a far greater contribution on Mary’s behalf — €36,000.

Not only that but a company could fund for previously unfunded service with the company through special contributions. For example, John is 50 and has his own company taking a salary of €40,000. John set up his company fteen years ago, has yet to make any pension contributions. Revenue limits allow John to contribute and o set against last year’s income tax bill. Again, as with Deirdre he is limited to age and earnings attained in the previous year. Assuming earnings of €40,0000 this would equate to 25% of €40,000 or €10,000.

However, Revenue also allows contributions to be made in respect of previous service by an employer using the executive pension plan. e calculation is based on the member’s current salary and all previous years with the company where they took a salary. is can be particularly bene cial for late starters to pension funding and in this example the company can contribute €518,400 into John’s pension! e employer could immediately make this very large Special Contribution for John, or they could seek to make a smaller Special Contribution this year and allow for the remainder in future years. ey could also look to make Ordinary Annual Contributions within certain limits. e company, again, will receive tax relief on allowable contributions at the current corporation rate of 12.5%. and no employer PRSI is paid on employer pension contributions to an occupational pension scheme.

With the year-end fast approaching your company may have funds and you are not sure how to proceed. rough a “maximum funding quote” you will quickly see what your tax e cient options are. Give us all call!

john@ellis nancial.ie 086 8362622

Christmas events at Rothe House

Rothe House is one of Kilkenny’s most unique properties dating from 1594 and is a leading visitor attraction with its original houses, three courtyards and restored garden, all waiting to be explored. Rothe House will host a variety of seasonal events this December.

Wreath Making Workshop

is year sees the return of the ever-popular wreath making workshops. Taking place on Saturday, 3rd December participants will have the chance to make their own unique festive wreath to decorate their front door this Christmas. e workshop also includes materials to make a centrepiece to dress your holiday table. All materials are included for this workshop, all you need to bring is scissors or secateurs and some creativity! Mary Pyke, Head Gardener at Rothe House facilitates this workshop every year. “I am so pleased to have our wreath making workshops back again this year. e workshops are always great fun and it inspires people to try their hand at creating other simple, natural, decorative pieces for their home. We nd that it has become a tradition for many people who take part year after year.” Booking for the workshops is via Eventbrite. Places are limited so early booking is advisable.

Christmas Miscellany

On Tuesday 13th December, Rothe House will host a magical Christmas Miscellany evening featuring storytelling, music, poetry and song from familiar and emerging voices in Kilkenny’s arts scene. e winter’s evening will begin with a cosy mulled wine reception around the Christmas tree, before moving to the atmospheric surroundings of the Phelan Room. “We are very excited to hold this event in Rothe House and have received a wonderful response from local writers and musicians,” says Valerie O’ Sullivan, General Manager of Rothe House. “A programme of new and traditional material has been carefully put together and it is an opportunity for the audience to step away from the hustle and bustle of preparations and enjoy a nostalgic evening in one of Kilkenny’s most beautiful venues.” is project is funded by the Kilkenny Creative Ireland Programme 2022.

e Merchant Shop Customer Evening

Rothe House are proud to support Irish producers and craftspeople and stock a wide range of beautiful ceramics, textiles and giftware. e bookshop specializes in local interest, Irish history and gardening, as well as a selection of children’s books. On ursday, 15th December there will be a Customer Evening with discounts across the shop, treats for shoppers and a ra e for a deluxe hamper.

Rothe House is open Tuesday – Sunday from 10am to 5.30pm. Guided tours take place at 11.30am and 2.30pm every day and it is the perfect place to bring visitors home for Christmas.

For more information, call 056 772 2893 or follow us on Facebook @rothehouse and Instagram @rothe_house_garden

Booking for the Wreath Making Workshops and Christmas Miscellany are via Eventbrite only.

Mary Pyke and Ann Lynch preparing materials for the Rothe House Wreath Making Workshops