To give a very practical example, without my full financial details.If I’m on €150k, I can stick €29k into my pension.
If I’m an “employee” with, for example, RTE, I have my own one-man-band company and I can squirrel multiples of that away.
That isn’t fair. Either allow everyone to fund for a capital sum that will deliver 2/3 of final salary or restrict employer contributions by one-man-band companies to the same €115k/percentage stuff.
I'm currently an employee. Late 30's and mortgage free, with a nest egg to meet unexpected expenses.
Nature of my work would allow me to set up a "1 man shop" company, and continue doing what I do, with the same job security.
Purely from a pension perspective I am considering doing so, but at early stages in analysing. Round numbers below, and ignoring other differences of being self employed.
Option 1:
Employee.
100k salary, with 15k employer contribution.
Max contribution I can make is 20k, so total pension contribution of 35k.
Option 2:
Company director
Total company income 115k which matches total package of employee.
I've about 200k existing pension funds which impact the total I can contribute, but it's still significant. By setting my normal retirement age as 60, my contributions can be about 100% of salary. Basically I can get relief on as much as I can afford to put away.
A further motivation for me is my wife doesn't currently work, so isn't building a pension pot. When she returns to work, the plan is to maximise her pension contributions, but it'll never be a huge pot. @Brendan Burgess idea of age related funds would make a huge difference in cases like my wife's where she'll have missed about 8 years of working.