Company directors have a unique advantage when it comes to funding for retirement. Rather than being restricted to the usual contribution limits applicable to the self-employed and PAYE workers, company directors benefit from the ability to divert company profits to a private retirement fund. Using company funds to invest in a pension is often the most tax-efficient way the director can access the profits of their business.  Compared to taking profits as salary where income tax, PRSI and USC are all applicable, all pension contributions are invested tax-free and have no benefit-in-kind implications.


As well as this, the company will receive corporation tax relief. While DIRT or Exit Tax apply to other investments,  any growth achieved by pension funds is not subject to tax, making it easier for individuals to build up a their retirement fund.


At retirement, based on current legislation a company director is entitled to a minimum of 25% of their total retirement pot as a tax free lump sum, subject to a maximum lifetime tax free lump sum limit of €200,000. A tax free lump sum higher than 25% of the fund might be available depending on calculations based on salary and service with the company. A number of options are available for the balance of the fund – it can be used to purchase an annuity which is a pension income for life or it can be reinvested in an Approved Retirement Fund (ARF), from which a regular withdrawal is taken.


For example:

John is a director of ABC Ltd.

He has an annual salary of €40,000, is married, is aged 45 and hopes to retire at age 68.

 John was going to set up a personal pension, which he would fund personally. If he did this, the maximum he could contribute would be 25% of his salary€11,250. His financial planner advised him that he can extract excess company profits from his business through an Executive pension, funded by his company. The maximum that can be invested for John by the company is €33,913 per annum.

The company will get corporation tax relief and there will be no deduction from John’s salary for this.

Without the financial advice from a qualified professional, John would not have realised the scope he had for retirement funding.


Contact Wealth Team in Sheridan Insurances today to learn how to transfer your company profits into personal wealth.

Call us on 0818 222 700