Private Sector Occupational Pension Schemes

Coverage

Voluntary insurance

Employers are not obligated to offer a private sector occupational pension scheme, and whether membership of the schemes is voluntary or compulsory for the employee depends on the particular scheme.
It would generally be available to all employees in a particular workplace.

Financing

General finances

Financed by capital funding based on member contributions.

Contribution rates

Defined benefit schemes: contribution rates are determined by reference to the defined benefit and paid by the employee. Employer contributions are permitted but not compulsory.
Defined contribution schemes: the level of contribution is set by the scheme. Employer contributions are permitted but are not compulsory.
Hybrid schemes: are combination schemes, self-annuitising schemes, final salary lump sum schemes, underpin schemes.
Combination scheme: employer contribution of 5% of earnings in excess of 2 times the State Retirement Pension.
Self-annuitising scheme: employer contribution of 5% of pensionable earnings for each year of pensionable service.
Final salary lump sum scheme: no employer contribution.
Underpin scheme: employer contribution of 15% of pensionable earnings.
Cash balance scheme: no employer contributions

State support & incentivising strategies

There is no taxation on contribution payments.
Tax relief is available on employee contributions and is granted on earnings subject to age-related caps of between 15% to 40% of earnings. Earnings are subject to a further limit of EUR 115,000. The portion of earnings that an employee can claim tax relief on is determined by their age.¹

Administration

Defined benefit and contribution occupational pension schemes are managed by trusts and administered according to pensions law, revenue requirements, the governing trust documentation and trust law.
The regulation of private sector occupational pension schemes is overseen by the Pensions Authority. The Revenue Commissioners also monitor compliance of group schemes (large employer with many businesses).
Hybrid schemes are administered via a closed pension fund, or by an insurance company. Regulated by the Pensions Authority.

Qualifying Conditions

The terms will normally be dependent on the scheme itself but there are some statutory conditions, as well as other conditions which are common to most private sector occupational pension schemes.
Qualifying service: benefits will vest following the completion of two years of ‘qualifying service’. A person who leaves a scheme early will generally (unless the scheme determines otherwise) not have any entitlement to preserved or deferred benefits. Refunds or transfers may be possible in such circumstances.
Age: most schemes specify a normal retirement age which must be between the ages of 60 and 70 years (unless otherwise agreed with the Revenue Commissioners).
Early retirement/ill health: in cases of early retirement or ill health, certain benefits will be provided. In the case of ill health, benefits can be provided from any age. Early retirement can be taken from age 50 but in defined benefit schemes an actuarial reduction to reflect early payment may be applied. Where a defined benefit scheme is underfunded, the Pensions Act permits the trustees to refuse early retirement applications.

Benefits

Pension payments

Defined benefit schemes: retirement benefits are defined normally based on earnings (final salary or career average) and are dependent on the scheme design. The benefit accrued is most usually calculated by reference to final salary: a fraction of salary for each year of service (for example, 1/60th or 1/80th of salary for each year of service). Members may be entitled to a retirement pension (or an annuity purchased from an insurance company) with the option to claim part or all of their benefits as a tax-relieved lump sum.
Defined contribution scheme: the normal retirement benefits include retirement pension from the scheme (or in the form of an annuity purchased from an insurance company) with an option to claim part or all of their benefits as a retirement lump sum. The benefits payable depend on the number of years of service.²Generally, a person with 40 or more years of service will receive an amount which does not exceed two thirds of the final remuneration. Those with less than 40 years of service can also receive two thirds of their final remuneration as long as they accrued it over a minimum of ten years to retirement.
Hybrid schemes: the benefits accruing will normally be dependent on the terms of the scheme. These schemes normally have elements of both defined benefit and defined contribution schemes. Generally, the schemes administer benefits in the manner as described below.
Combination scheme: benefits are calculated by 1/60th of pensionable earnings up to 2 times the State Retirement Pension x pensionable service, plus defined contribution benefits with 5% employer contribution on earnings in excess of 2 times the State Retirement Pension.
Self-annuitising scheme: accumulated fund converted to a pension income in accordance with the rules of the scheme.
Final salary lump sum scheme: 20% of final year pensionable earnings x pensionable service.
Underpin scheme: 2% of career average earnings (without revaluation) x pensionable service, plus defined contribution benefits with employer contribution of 15% of pensionable earnings.
Cash balance: 8% of pensionable earnings for each year of pensionable service. Account balance increased by a specified rate of interest each year.

Taxation and social security contributions

Pension lump sums under EUR 200,000 are tax-free. The next EUR 300,000 of pension lump sum taken from all pension arrangements since 07/12/2005 is taxable at the standard rate of income tax (20% in 2021). Any lump sum over the EUR 500,000 limit will have Universal Social Charge deducted and will be taxed at the higher rate (40% in 2021). There is also a cap on the maximum value of retirement benefits that any individual can build up from 07/12/2005 onwards. This is called the Standard Fund Threshold (SFT) and is EUR 2 million.

Coverage

Financing

Administration

Qualifying Conditions

Benefits

Voluntary insurance

Employers are not obligated to offer a private sector occupational pension scheme, and whether membership of the schemes is voluntary or compulsory for the employee depends on the particular scheme.
It would generally be available to all employees in a particular workplace.

General finances

Financed by capital funding based on member contributions.

Contribution rates

Defined benefit schemes: contribution rates are determined by reference to the defined benefit and paid by the employee. Employer contributions are permitted but not compulsory.
Defined contribution schemes: the level of contribution is set by the scheme. Employer contributions are permitted but are not compulsory.
Hybrid schemes: are combination schemes, self-annuitising schemes, final salary lump sum schemes, underpin schemes.
Combination scheme: employer contribution of 5% of earnings in excess of 2 times the State Retirement Pension.
Self-annuitising scheme: employer contribution of 5% of pensionable earnings for each year of pensionable service.
Final salary lump sum scheme: no employer contribution.
Underpin scheme: employer contribution of 15% of pensionable earnings.
Cash balance scheme: no employer contributions

State support & incentivising strategies

There is no taxation on contribution payments.
Tax relief is available on employee contributions and is granted on earnings subject to age-related caps of between 15% to 40% of earnings. Earnings are subject to a further limit of EUR 115,000. The portion of earnings that an employee can claim tax relief on is determined by their age.¹

Defined benefit and contribution occupational pension schemes are managed by trusts and administered according to pensions law, revenue requirements, the governing trust documentation and trust law.
The regulation of private sector occupational pension schemes is overseen by the Pensions Authority. The Revenue Commissioners also monitor compliance of group schemes (large employer with many businesses).
Hybrid schemes are administered via a closed pension fund, or by an insurance company. Regulated by the Pensions Authority.

The terms will normally be dependent on the scheme itself but there are some statutory conditions, as well as other conditions which are common to most private sector occupational pension schemes.
Qualifying service: benefits will vest following the completion of two years of ‘qualifying service’. A person who leaves a scheme early will generally (unless the scheme determines otherwise) not have any entitlement to preserved or deferred benefits. Refunds or transfers may be possible in such circumstances.
Age: most schemes specify a normal retirement age which must be between the ages of 60 and 70 years (unless otherwise agreed with the Revenue Commissioners).
Early retirement/ill health: in cases of early retirement or ill health, certain benefits will be provided. In the case of ill health, benefits can be provided from any age. Early retirement can be taken from age 50 but in defined benefit schemes an actuarial reduction to reflect early payment may be applied. Where a defined benefit scheme is underfunded, the Pensions Act permits the trustees to refuse early retirement applications.

Pension payments

Defined benefit schemes: retirement benefits are defined normally based on earnings (final salary or career average) and are dependent on the scheme design. The benefit accrued is most usually calculated by reference to final salary: a fraction of salary for each year of service (for example, 1/60th or 1/80th of salary for each year of service). Members may be entitled to a retirement pension (or an annuity purchased from an insurance company) with the option to claim part or all of their benefits as a tax-relieved lump sum.
Defined contribution scheme: the normal retirement benefits include retirement pension from the scheme (or in the form of an annuity purchased from an insurance company) with an option to claim part or all of their benefits as a retirement lump sum. The benefits payable depend on the number of years of service.²Generally, a person with 40 or more years of service will receive an amount which does not exceed two thirds of the final remuneration. Those with less than 40 years of service can also receive two thirds of their final remuneration as long as they accrued it over a minimum of ten years to retirement.
Hybrid schemes: the benefits accruing will normally be dependent on the terms of the scheme. These schemes normally have elements of both defined benefit and defined contribution schemes. Generally, the schemes administer benefits in the manner as described below.
Combination scheme: benefits are calculated by 1/60th of pensionable earnings up to 2 times the State Retirement Pension x pensionable service, plus defined contribution benefits with 5% employer contribution on earnings in excess of 2 times the State Retirement Pension.
Self-annuitising scheme: accumulated fund converted to a pension income in accordance with the rules of the scheme.
Final salary lump sum scheme: 20% of final year pensionable earnings x pensionable service.
Underpin scheme: 2% of career average earnings (without revaluation) x pensionable service, plus defined contribution benefits with employer contribution of 15% of pensionable earnings.
Cash balance: 8% of pensionable earnings for each year of pensionable service. Account balance increased by a specified rate of interest each year.

Taxation and social security contributions

Pension lump sums under EUR 200,000 are tax-free. The next EUR 300,000 of pension lump sum taken from all pension arrangements since 07/12/2005 is taxable at the standard rate of income tax (20% in 2021). Any lump sum over the EUR 500,000 limit will have Universal Social Charge deducted and will be taxed at the higher rate (40% in 2021). There is also a cap on the maximum value of retirement benefits that any individual can build up from 07/12/2005 onwards. This is called the Standard Fund Threshold (SFT) and is EUR 2 million.

¹ The portion of earnings that an employee can claim tax relief on is determined by their age in accordance with the following table: aged under 30: 15% of earnings; aged 30 to 39: 20% of earnings; aged 40 to 49: 25% of earnings; aged 50 to 54: 30% of earnings; aged 55 to 59: 35% of earnings; aged 60 or over: 40% of earnings.

² One year: 4/60ths of final remuneration; two years: 8/60ths of final remuneration; three years: 12/60ths of final remuneration; four years: 16/60ths of final remuneration; five years: 20/60ths of final remuneration; six years: 24/60ths of final remuneration; seven years: 28/60ths of final remuneration; eight years: 32/60ths of final remuneration; nine years: 36/60ths of final remuneration; ten years: 40/60ths of final remuneration.

Legal Basis: Pensions Act 1990; S.I. No. 325 of 1991 - Occupational Pension Schemes (Registration) Regulations, 1991; S.I. No. 293 of 2006 - Occupational Pension Schemes (Trustee) Regulations 2006; S.I. No. 610 of 2002 - Occupational Pension Schemes (Fees) (Amendment) Regulations, 2002; S.I. No. 301 of 2006 - Occupational Pension Schemes (Disclosure of Information) Regulations, 2006; S.I. No. 294 of 2006 - Occupational Pension Schemes (Investment) Regulations, 2006; S.I. No. 292 of 2006 - Occupational Pension Schemes (Cross-Border) Regulations, 2006; S.I. No. 419 of 1993 - Occupational Pension Schemes (Funding Standard) Regulations, 1993; S.I. No. 175 of 2013 - The Occupational Pension Schemes (Funding Standard Reserve) Regulations 2013; S.I. No. 279 of 2002 - Occupational Pension Schemes (Preservation of Benefits) Regulations, 2002; S.I. No. 277 of 2002 - Occupational Pension Schemes (Preservation of Benefits) (Special Calculations) Regulations, 2002; Annual Occupational Pension Schemes (Revaluation) Regulations; S.I. No. 365 of 1992 - Occupational Benefit Schemes (Equal Treatment) Regulations, 1992; S.I. No. 155 of 2016 - Occupational Pension Schemes (Section 48A) Regulations, 2016; S.I. No. 509 of 2009 - Occupational Pension Schemes (Wind-Up) Regulations, 2009; S.I. No. 392 of 2014 - Occupational Pension Schemes (Sections 50 and 50B) Regulations, 2014; S.I. No. 532 of 2008 - Occupational Pension Schemes (Small Schemes in Wind-Up Exemption from Actuarial Funding Certificate Requirements); S.I. No. 177 of 2009 - Occupational Pension Schemes (Duties of Trustees In Connection With Bulk Transfer) Regulations, 2009; S.I. 137 of 2007 - Occupational Pension Schemes (Review of Actuarial Work) Regulations, 2007; S.I. No. 603 of 2005 - Occupational Pension Schemes (Professional Guidance) Regulations, 2005; S.I. No. 77 of 1997 - Occupational Pension Schemes (Oral Hearing) Regulations, 1997; S.I. No. 107 of 1997 - Pension Schemes (Family Law) Regulations, 1997; S.I. No. 233 of 2004 - Occupational Pension Schemes (Annual Reports) Regulations, 2004.