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Being a director or the owner of a company can be hectic. Too hectic sometimes, to take the time to plan your retirement. When you’re so busy coping with the next few weeks, it’s hard to think about your needs 20 or more years from now! It’s important, however, to have a realistic retirement plan in place for your future, especially if you have a good lifestyle to protect. You’ve worked hard for your benefits, and with a little thought, you can make sure you retain those advantages when you retire.

Perhaps you are hoping to rely on your business as your pension, but ask yourself:

• Will you be able to sell at the right time?
• How can you be sure that when you approach retirement, the firm will be doing as well as it is now? 
• Will your family members or co-directors agree to the sale?
• Consider the impact that capital gains tax could have should you decide to sell your business. 
• Or will you prefer to step back a little bit from the business when the time comes and still use its profits to provide you with an income?

Altogether this may not turn out to be the ideal way to provide for your retirement. You may find that relying on your business to fund your retirement restricts your options for the future. One of the most attractive, tax efficient ways for business owners to take profits from their company and turn them into personal wealth is to transfer these profits into a company pension.

Unlike other remunerations such as salary increases, bonuses or company cars, an employer contribution to a company pension plan is not viewed as income. That means neither you nor your company will pay tax on any pension contribution your company pays – and that adds up to a very significant saving. Then at retirement, you have the option to take a tax-free retirement lump sum and the balance of your pension fund can then be used to provide a retirement income.

Some Of The Rules Around Company Pensions

• A company director is only eligible to take out a company pension if they are set up as an employee of the company and are receiving Schedule E income from the company. 
• For a company pension to be approved as a tax-exempt arrangement it must be set up in trust. This is actually a huge advantage because it ensures that the benefits of the pension plan are kept totally separate from the company and are kept for the member and their beneficiaries, so they are not accessible by creditors in any company liquidation scenario.

Retirement planning is quite a complicated area so it’s best to get expert help. To discuss a tax efficient way to make the most of your company assets and create the best financial plan for your retirement, talk to your Financial Broker or Adviser today.

Sean Sweeney, QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor. You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on sean@jfl.ie