Pensions for Company Directors: Executive Pensions vs PRSAs

Aoife and her business partner run a two-director consultancy in Wexford. The company has had its best year yet, and Aoife, who is 45, asks her accountant a simple question: instead of paying her a bigger salary, can the company pay into her pension?

It can, and for many directors it is one of the most tax-efficient ways to take money out of a company. This guide explains pension tax relief in Ireland for directors, the two main routes (an executive pension or a PRSA), the limits, and how the payment is booked in the accounts.

Abbey Blue Formations does not sell pensions. For product advice, speak to a regulated financial adviser.

Why company contributions beat salary for many directors

If Aoife takes an extra €20,000 as salary, she pays income tax, PRSI and USC on it. If the company pays €20,000 into her pension instead:

• The company can deduct it for corporation tax, within the limits below
• It is not taxed as Aoife's income when it goes in, within those limits
• There is no PRSI or USC on the contribution

Our guide to paying yourself covers the salary and dividend side. The deduction reduces the company's corporation tax bill for the year the payment is made.

Executive pensions: what has changed

So, what is an executive pension plan? Traditionally, it is an occupational pension set up by a company for one director or key employee, run under a trust. These single-member schemes are known as one-member arrangements.

Under the 2021 pension regulations, one-member arrangements set up before 22 April 2021 had a temporary exemption from the full governance rules. The Pensions Authority confirmed that this exemption expired on 21 April 2026. Schemes that continue must now meet the same obligations as other schemes, including key function holders, trustee qualifications, investment rules and a risk assessment.

The Pensions Authority has said that compliance may not be financially viable for many of these schemes and has urged trustees to talk to their administrator about their obligations or consolidation options. If you have an older executive pension, ask your adviser now what your scheme has done.

PRSAs for directors

So, what is a PRSA? A Personal Retirement Savings Account is an individual pension contract. It belongs to you, moves with you if you change jobs, and does not need a trust or trustees.

For directors, the key change came on 1 January 2025. Your company can pay into your PRSA up to 100% of your salary from that employment in the tax year. Anything above that is treated as a benefit in kind, taxed through payroll, and is not deductible for the company. Compliance is tested on 31 December.

For Aoife on a €60,000 salary, that means the company can contribute up to €60,000 to her PRSA in the year without a BIK charge. Part of answering what is a PRSA is knowing the two types: standard and non-standard, which differ mainly in charges and investment choice.

A PRSA in Ireland can normally be drawn from age 60 and is treated as vesting at 75.

Pension tax relief in Ireland: the limits that apply

Pension tax relief in Ireland on your own personal contributions is limited by age, as a percentage of earnings:

The maximum earnings used for the calculation is €115,000 a year. Employer contributions do not count toward these personal limits, which is why company contributions are so useful.

Two limits apply when you retire:

• Standard Fund Threshold: €2.2 million. Funds above it are taxed at 40%.
• Retirement lump sum: the first €200,000 is tax-free, the next €300,000 is taxed at 20%, and anything above €500,000 is taxed at your marginal rate.

The bookkeeping side: booking contributions correctly

This is where your accountant comes in. Employer pension contributions are deducted for corporation tax in the accounting period in which they are actually paid. An amount that is accrued but not paid by the year end does not qualify.

So if Aoife's company has a December year end, the contribution must leave the bank account by 31 December to count for that year. A promise to pay in January does not work.

Good practice:

• Pay from the company bank account, not personally
• Keep the provider's confirmation and annual statements
• Book it as a pension expense, separate from salary
• Check the PRSA limit against salary before year end

We handle this as part of your annual accounts and CT1, and our bookkeeping services keep the records tidy through the year. Personal contributions you make yourself are claimed on your Form 11 for directors.

Questions to ask before you choose

Before you pick a route, ask your financial adviser:

• When can I access the fund? Occupational schemes can allow early retirement from 50, but a director with 20% or more of the company must generally sever all links with the business, including selling their shares.
• What are the total charges each year?
• What investment choice do I get?
• If I have an older executive pension, does it now meet the governance rules?

Frequently Asked Questions

Plan director pay and pensions with your accountant

Salary, dividends and pension contributions work best when they are planned together before the year end. Abbey Blue Formations can model the options for your company and make sure contributions are booked correctly. Setting up a new company first? Use our formation calculator. To book a call, click here.