What Is an Executive Pension Plan?
Katerina works as an executive professional in an Ltd company. She is one of the most innovative employees of the company as she has helped the company grow exponentially. Priya, another employee of the same company and good friend of Katerina, was sitting in the conference room looking tense. Katerina approached her and asked her about it. She replied that with retirement coming in several years and his kid wanting to go abroad to study, she lacks funds as whatever she has saved or invested won’t be enough. Katerina is excellent in finance, and she advised Priya to set up a pension scheme from the pension plans.
Are you, too, an executive or employee of small and mid-size enterprises (SMEs) and are shuffling through pension plans? Let us help you guide your pension planning.
What are Executive Pension Plans?
The executive pension plan is an investment retirement plan designed for employees and directors to gather when they retire. Administrators create such a pension plan on account of the members. Both employees and employers can avail of tax benefits on their contributions. An executive pension plan is designed for those working in and running SMEs. It helps employees and employers get the most from their contributions. The pension does not have any tax dues for any amount which grows under this pension scheme. If you want to alter any additional plans, you can add AVCs to the same. But then, there is a limit to how much amount an employee can add.
Benefits of an Executive Pension Plan
- The limits on contributions to an executive pension are significantly greater than other pension plans.
- The tax benefits of choosing this pension scheme are more significant than that of other schemes. The maximum relief on a personal pension contribution is 40%, and an executive pension effectively saves you tax at 52%.
- You can claim the benefit of your pension from the age of 50, whereas, for a personal retirement, it is age 60. Choosing an executive pension plan is better than other pension plans if working in an ltd company.
- Opting for an executive pension plan can help you save more than you think.
- It also offers an option of additional voluntary contributions (AVCs). It means you can add extra payments to your executive pension plan. The AVCs will be separate from the regular prices. AVCs can help you boost your retirement funds significantly.
- Any kind of employee pension scheme is beneficial in helping you in living the life that you want after retirement. Most of us have long years to live by compared to parents and guardians, which means that we have more pensionable time in hand and hence can earn more money in the time of our retirement.
How much can you contribute to your pension through your SME company?
Wondering about how much can you contribute to your pension scheme? Well, there are several factors on which it depends. As someone making personal contributions, you are restricted to the generic revenue rules that relate to your age and salary. For example, if you live in your 50s, it will be 35% of your salary. Still, when the company makes the contribution for you, which is the case in the executive retirement plan, there are a variety of factors that are kept in mind for pension plans, they are:
- Your age
- Your sex
- Your marital status
- Your salary
- Your retirement age
- Years of working as an employee
Everyone needs to have backup funds after they retire. There can be many situations in our life that may come unforeseen and are hard to escape. It is always best to be ready for it. Sit down with your monetary broker today and get all the pension information that you need. Make a pension enquiry to choose the best suitable plan for you from all the existing pension plans and live the comfortable and stress-free life you dream of having after retirement.
What happens if I die before I draw on my pension plans?
Now in the matter of early death, a person can still manage to withdraw the premiums of the executive pension plan in full. In such cases, the family operates to receive an amount that is up to 4x the salary withdrawn by the employee at the time of their death. If there is any balance left, it’ll be utilized in purchasing an annuity for the spouse or any dependant. Remember that one has an option, to sum up, additional life insurance to their existing executive plans.
What is a Financial Broker?
A Financial Broker is an expert in financial and pension matters who works with you to understand your financial goals and helps you create a plan to meet those goals. Suppose your Financial Broker recommends an Executive Pension as the most suitable option for you. In that case, they will recommend a plan from the range of companies they deal with, providing you with a “fair analysis” of the market.