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How Company Pensions Work

A company pension plan or occupational pension plan, as it is also known, is one that an employer sets up in order to provide retirement benefits for their employees. From the employees' point of view, a key advantage of a company pension plan is that the employer organises the pension plan and makes a contribution to the plan on behalf of the employees. In addition, the charges associated with pension plans are generally lower for group pension plans than for individual pension plans so it makes sense to join the company plan if one is provided by your employer.

If you start contributing to one of these plans, another advantage is that your employer will take your pension contributions from your salary before any income tax is deducted. This means that your retirement fund gets the benefit of the income tax, instead of it being paid to the taxman. This is particularly beneficial if you are paying income tax at the higher rate.

Advantages of company pension plans

As an employee, the main advantages of a company pension plan are:

  • Your employer organises the pension plan and makes contributions into the pension fund on your behalf.
  • Your pension contributions are taken from your salary at source (i.e. before any income tax is deducted).
  • You will receive income tax relief on your pension contributions and any investment returns on your fund can also accummulate tax free. Therefore it is an extremely worthwhile method of saving.
  • Charges are generally lower for group pension plans than for individual pension policies.
  • Your employer's pension contributions are not regarded as Benefit in Kind and are therefore not subject to Benefit in Kind tax.

Your Pension Fund at Retirement

Regular saving into your pension plan during your working years should mean that you have an adequate retirement fund amount built up by the time you get to retire. At that stage you will have a number of options on what you can do with the accumulated pension fund. These will include taking part of the pension fund as a tax-free lump sum as well as using the fund to provide a pension income for the rest of your life. You will also have the option of taking a spouse/civil partner's pension that will be paid after your death. For further details talk to your Financial Advisor.

What should I consider when deciding on my investment options?

There are a few essential issues that you should consider when deciding on your investment options:

  • How much time do you have to save and invest before retirement?
  • How much risk are you comfortable with?
  • How much money will you need when you retire?
  • What combination of benefits are you going to take when you reach retirement?

Over the years you and your employer will hopefully be investing a large amount of money into the pension plan. Therefore it makes sense to understand what your investment options are and make informed choices, which will bring you increased financial benefits when you reach retirement.

WARNING: If you invest in this product you will not have any access to your money until your retirement date.

WARNING: The value of your investment may go down as well as up.

WARNING: The income you get from this investment may go down as well as up.

WARNING: The value of the fund may be affected by changes in currency exchange rates.

WARNING: If you invest in this product you may lose some or all of the money you invest.

Irish Life Assurance plc is regulated by the Central Bank of Ireland.

In the interest of customer service we may record and monitor calls. Irish Life Assurance plc, Registered in Ireland number 152576, Vat number 9F55923G.

Irish Life Assurance is part of the Irish Life and Permanent Group. Registered office is situated at Irish Life Centre, Lower Abbey Street, Dublin 1.

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