Private Pensions Overview

If you want to ensure that you have adequate income in retirement, and the State pension (approximately €1,000 per month) will not meet your needs, you should be aware of the pension options open to you. Your’ pension options will depend mainly on your work situation, although you may still be able to choose which option is best for you.

If you are employed, you may be covered by an employer-sponsored occupational pension scheme or relevant public-sector scheme.

If you aren’t covered by these or if you are not an employee, you may be able to take out your own Personal Retirement Savings Account (PRSA) or Retirement Annuity Contract (RAC).

Public Sector Occupational Pension Schemes

Public sector occupational pension schemes are statutory plans set up by legislation or trust-based arrangements that provide benefits for employees in the public sector or semi-state bodies. In general, only schemes for Commercial State Bodies have a dedicated fund to meet pension liabilities. Schemes in the non-commercial public sector, such as the Civil Service, Local Government, Education, Gardaí, Prison Services and Health Services are financed on a “pay as you go” basis. This means that the cost of pensions is met from current exchequer expenditure in much the same way as the salaries and wages of public sector employees.

Private Sector Occupational Plans

Also known as company pension plans, these are set up by employers and can provide benefits including a tax-free lump sum (within certain limits), and pension income in retirement.

These benefits will generally be based on;

  • your final earnings (final salary defined benefit schemes) or
  • your average earnings throughout your career (career average defined benefit schemes) or
  • the value of your pension fund at retirement (defined contribution schemes).

Apart from benefits on retirement, pension schemes can provide benefits to dependants on death in service or death after retirement. Pension benefits are also portable and need not be “frozen” when your employment status changes.

You should check and see if your employer has such a scheme and whether you are eligible to join. Or you may have been a member of such a pension scheme in the past and still have benefit entitlements under the scheme.

Trust Based Pension Schemes

Your rights as a member of a pension scheme are valuable and important to you and your dependants. As your pension may not start for many years and may continue long after you retire, your scheme must be managed properly so it is able to pay your benefits when they are due. Occupational pension schemes are normally set up under trust. The scheme’s assets are looked after by trustees on behalf of members, their dependants and other beneficiaries.

A trust is a legal arrangement under which trustees hold the assets of the pension scheme in a trust fund for the benefit of the members of the scheme and their dependants, and for the purpose of providing income in retirement.

The main reason for separating the scheme’s assets from the employer’s business is to ensure that these assets will be available to pay members’ pensions whether or not the employer stays in business. Funding the pension entitlements as they build up also helps to spread the cost of providing pensions over the working life of the scheme members.

Under trust law and the Pensions Act 1990, pension scheme trustees must ensure that schemes are run properly and they must protect your rights as a scheme member. They are also responsible for whistle-blowing to the Pensions Authority if they think something is seriously wrong.

In some schemes, members are able to nominate representatives to act as Member Nominated Trustees.

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