Occupational pension schemes

While retirees in Ireland are entitled to the state pension, many people find that it is not enough to provide a comfortable lifestyle in their later years. That’s why it can be worth considering other pension options, such as an occupational pension scheme.

On this page, you’ll find out about the different types of occupational pension schemes in Ireland, how they work, and the pros and cons of these schemes. We’ll also take a look at other ways you might consider saving for retirement, such as by opening a high-interest savings account.

An occupational pension, also known as an employer pension, workplace pension, or company pension in Ireland, is a retirement plan provided to an employee by their employer. It’s a way for employees to save for retirement, with contributions made directly from your paycheck and often matched by your employer. This fund grows over time, with the aim of giving you financial security when you retire. Once you retire, you can take your pension benefits in the form of a lump sum payment, a regular income, or a combination of both.

No, employers are not legally required to offer their employees occupational pension plans, and many smaller employers choose not to provide them. However, when it comes to employer pension obligations in Ireland, if your employer doesn’t offer an occupational scheme, they must provide access to a personal retirement savings account (PRSA). A PRSA is a type of long-term personal pension scheme that you set up yourself.

There are several different occupational pension schemes available, and you’ll likely find differences related to whether your employer contributes to the scheme and how the final pension amount is calculated.

Most occupational pension schemes in Ireland are funded, which means that contributions from both employers and employees are pooled into an investment fund to build up future pension benefits. This is different to unfunded schemes that are common in the public sector, where benefits are paid directly by the employer once due, in a “pay as you go” format.

With contributory schemes, both you and your employer make regular contributions to the pension fund, and they’re usually deducted from your salary. You can also choose to make Additional Voluntary Contributions (AVCs) to boost your retirement fund. Non-contributory pensions, on the other hand, are solely funded by your employer.

With a defined benefit scheme, the level of pension you get depends on your average salary, how many years you’ve worked, and other factors. This is then used to calculate how much you’ll be paid once you retire, and you’re guaranteed to get that particular income throughout retirement. With some defined benefit schemes, your employer may be able to top up the pension fund.

This is an occupational pension plan set up by your employer where you contribute a certain percentage of your salary each month, and your employer will match that amount. These contributions are invested in a fund, which will be used to provide pension benefits when you retire. You won’t know your final pension amount until you retire, as it will depend on the performance of the investments and the contributions made, so this type of company pension comes with a certain amount of risk.

Hybrid schemes combine features of both defined benefit and defined contribution schemes. For example, in a combination scheme, some of your income could be predictable, as in a defined benefit scheme, while the rest could be variable, as in a defined contribution scheme. The risk that comes with investments and pension costs is often shared between the employer and employees. This ensures you get a suitable level of benefits once you retire.

If you are currently employed, it’s likely that you’re enrolled in some form of occupational pension scheme. To confirm this, the first step is to check with your employer. They will be able to provide you with information about any pension schemes you’re enrolled in as part of your employment benefits.

It’s also worth asking about any benefits you may have built up from contributions made to an occupational scheme in the past. Even if you’re no longer with the same employer, you could still be entitled to benefits from previous company pension contributions.

Yes, you can receive both a state pension and an occupational pension in Ireland. Your occupational pension is typically provided by your employer or through a pension scheme you’ve contributed to during your working years. The state pension, also known as the contributory state pension, is paid by the government and is based on your social insurance contributions (PRSI) throughout your working life. Because the contributory state pension isn’t means-tested, you can claim it even if you’re still working, or you have other income such as an occupational pension.

For more information and advice on managing your particular pension situation, you might like to contact the Department of Social Protection or a financial adviser.

No, you don’t make Pay Related Social Insurance (PRSI) contributions on your occupational pension. PRSI contributions are typically associated with income earned through employment or self-employment, rather than pension income. Once you retire and start receiving your occupational pension, it’s dealt with separately from your working income, so PRSI won’t apply. It’s worth noting, however, that you may have to pay the Universal Social Charge (USC) on your occupational pension, with the rate you pay varying depending on your age and medical card status.

Occupational pension schemes typically offer retirement benefits between the ages of 60 to 70, but you can choose to take early retirement between 50 and 60. If you choose early retirement, you must have resigned from your job once you start taking your benefits.

Any contributions made to an occupational pension scheme in Ireland are put into a fund, and benefits from that fund are typically paid out in regular instalments directly to you once you reach retirement age. These payments are often made monthly and are based on the terms of your specific pension scheme.

Some pension schemes may also offer the option to receive a tax-free lump sum payment (within certain limits) instead of monthly instalments, depending on the rules of the scheme and your preferences. You might also be able to take out an additional amount, but this will be taxed at your usual income tax rate. The amount of money you can take out of your pension will depend on the particular terms of your occupational pension plan.

Advantages:

• A reliable source of income during retirement, making an ideal addition to the state pension.
• Many occupational schemes have employer contributions to help boost your retirement savings.
• Your own contributions to the occupational pension scheme benefit from tax relief, up to certain limits.

Disadvantages:

• Depending on the terms and conditions of your scheme, you may have less control over how your company pension contributions are invested.
• The value of your pension fund may be subject to market fluctuations, and there is no guaranteed return on your investments.
• It may be difficult to access your pension until you reach retirement age.

As you start thinking about stepping away from work, it’s important to consider that the state pension might not provide enough income to support you comfortably throughout the two decades you could potentially spend in retirement. In addition to occupational and personal pension schemes, opening a savings account can be an effective way to boost your retirement income.

If you’re happy to lock away your money for a specified period, typically between six months and five years, a fixed term deposit account could be worth considering. These accounts tend to offer the highest interest rates, allowing you to maximise the return on your deposit.

If you’re looking to give your retirement savings a boost, you’ll find a wide range of savings accounts on our marketplace. Whether you prefer easy access or fixed term savings options, there is something to suit everyone. All you have to do is register for a Raisin Account (it’s free), choose your savings account, transfer your money, and watch your savings grow!