Employer's contribution to pension fund

[AOR]

I'm starting a new job quite soon. My new employer has made it clear that, in addition to my salary, there'll be a contribution (calculated as 15% of gross salary) towards a pension plan but that the arrangements will be left to me. I'm currently saving a deposit for a new house and it would be useful if, for the next 12 months, I could take the 15% as an additional payment on top of my salary and defer setting up a pension fund until this time next year. Does anyone know if this is possible or even advisable? I presume there are BIK and tax implications. If the additional 15% is going to be taxed down to nothing then I might decide to simply set up the pension fund now and apply the contribution to it entirely.

 

[Baracuda]

As you said your employer has made it clear that there will be a 15% contribution to your pension. The reason that your employer is most lightly doing this is because there is an agreement in place regarding pension benefits for employee's or your employer has the best interests of his/her employee's at heart. As your employer has left the arrangements up to you, your employer will insist that you set up an employer billed PRSA so they can observe that the pension contribution is actually paid into the pension as there is employer PRSI relief available on PRSA contributions. So based on this you do not have a choice on whether you take this as salary.

You should ask your employer to set up a single member executive pension as this does not attract USC where as if you set up a PRSA you will have to pay USC on the employers contribution. If I were you I would ask your Financial Advisor to speak to your employer regarding this issue on your behalf.

 

[AOR]

Thanks for the advice. I'm not altogether sure that they're going to seek proof that the contribution is going into a pension fund. The whole arrangement, based on what they've told me about it to date, seems a little loose. They mentioned that the 15% could, for example, be applied towards a health insurance policy, etc. at my discretion. In all likelihood, I'll apply the lot to a pension and start making a contribution from my salary next year as soon as the house deposit is sorted. I have to talk it over with a friend who works in this whole area and consider the options. Some useful info there on the USC liability, thanks again.