Need to start PRSA with 100k by end of this month, recommendations?

A

Aladdin

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Myself and spouse are both self-employed, late forties and no pension. Our limited company, in which we are both employed has made way too much profit this year - circa 300k - and since we've no pension provision at all, accountant has advised us to lob 100k or so each into a PRSA pronto before company year end this month to be more tax efficient.
Haven't a notion where to start and even what to look for - I've read a bit about ETFs etc but because we're under pressure with time, a more simplistic choice is a necessity. Have an appointment with a local pensions provider next week and be grateful for a heads-up on any potential newbie pitfalls etc.
Thanks!
 
kevhenry said:
It's an executive pension/directors pension you're looking for rather than a PRSA. They can be set up in advance of your y/e so you have time to get any lump sums transferred over.

Kevin
www.thepensionstore.ie
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Great thanks, accountant recommended PRSA but like I said I'm a complete newbie. OK to put lump sum of 100k each in to whatever kind of plan might be?
 
Calculations can be done to determine the capacity of funding you each have which would be based on your age, salaries and years of service to date. Lump sums can be also be backdated with executive pensions to the date employment started in your company.

Kevin
www.thepensionstore.ie
 
Definitely not a PRSA. This has a much lower limit on eligible contributions.
As Kevin said, you need to establish Executive Pensions, higher potential contribution and greater contribution flexibility. If you do start off with a Lump Sum investment only, then tax relief (against Corporation Tax) is spread over the next 5 years. So you need to establish an expected Annual Contribution and add to this by “once off” lump sums in order to maximise offset against current year’s profits.
Get your pension advisor to work out the numbers.
 
Conan said:
Definitely not a PRSA. This has a much lower limit on eligible contributions.
As Kevin said, you need to establish Executive Pensions, higher potential contribution and greater contribution flexibility. If you do start off with a Lump Sum investment only, then tax relief (against Corporation Tax) is spread over the next 5 years. So you need to establish an expected Annual Contribution and add to this by “once off” lump sums in order to maximise offset against current year’s profits.
Get your pension advisor to work out the numbers.
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Brilliant thank you, yes maximise offset against this year's profits is exactly what we need to do, hence the urgency. Would Executive Pensions be more complex/expensive than PRSAs? Trying to avoid getting stung as best we can!
 
They’re just different.

A PRSA is owned by you personally and it can facilitate combined personal and employer contributions up to employee funding limits as Conan said. Limits are much higher and can go back further because they can avail of company funding limits.

Executive pensions are set up under trust/master trust and benefits are paid for and facilitated by your limited company. They typically have a wider investment platform and are usually more cost effective than PRSA’s but not always.

In any case a PRSA would not be the way for you to go under the scenario you've outlined.

Kevin
www.thepensionstore.ie
 
Hi Aladdin,
Once you have decided that the executive pension route is best for you and your spouse then I suggest your logical next steps to be as follows;

  1. Look for Executive Pensions with competitive charges
  2. The charges include any initial charge on contributions and you really should be looking at no charge i.e all of you premiums invested as the starting position
  3. Then you need to look at the charges paid to the life company or fund manager/trustee ( if you go down the self administered route)
  4. These are annual charges - sometimes called annual management charge or AMC. Please note that AMC figures are not a full disclosure and you should be looking at total on going cost factors or OCFs for a more accurate disclosure of costs. 0.5% AMC should be achievable and with some providers using passive funds, OCFs of approx. 0.5% should also be achievable depending on certain qualifying max ages
  5. Decide if you need/want on going financial advice for help with financial planning investment strategy etc and talk to a couple of firms if you are considering this
  6. Get proposals re suitable investment strategies or if you are confident to make these decisions on your own , then have a clear evidence based approach to investment markets
  7. Get a max funding calculation done to ensure that you and your spouse qualify for the size of the company projections you are looking at
There are plenty of posts here which will give you guidance of many of the above.

All the best Vincent
 
My head is wrecked - accountant is adamant it's PRSA we need, but the pensions advisor is equally adamant we need an executive pension! Yet neither can quite explain why.
Is it that you maybe can add personal contributions to a PRSA down the line so as to minimise personal tax on a Form 11?
 
Aladdin said:
My head is wrecked - accountant is adamant it's PRSA we need, but the pensions advisor is equally adamant we need an executive pension! Yet neither can quite explain why.
Is it that you maybe can add personal contributions to a PRSA down the line so as to minimise personal tax on a Form 11?
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Your accountant is wrong. The limits for tax relief on contributions are far lower with PRSAs than with Executive Pensions. You wouldn't get tax relief on €100,000 into a PRSA in a single year.

That said, I'm not impressed to hear that your pensions adviser can't explain the difference to you.
 
Ask the accountant to explain why. They probably aren't pension specialists themselves so they may not be looking at it from a pension perspective. Their reasoning is probably based on some other consideration. If they cannot give a good accounting reason then they're probably coming with their own preference.
 
Update: Following on from last year's advice about this (thank you), I started an executive pension, but given the new rules this year for PRSAs and my circumstances as outlined above, should I be thinking about transferring all to a PRSA now, and loading further with any excess company cash?
 
Aladdin said:
Update: Following on from last year's advice about this (thank you), I started an executive pension, but given the new rules this year for PRSAs and my circumstances as outlined above, should I be thinking about transferring all to a PRSA now, and loading further with any excess company cash?
Click to expand...

Yes. Just reading the thread, your accountant had obviously been using a DeLorean to travel back and forth between 2023 and 2022. A PRSA is now the right choice.
 
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