The Director's Pension Advantage

How Irish company directors can structure retirement savings as a powerful wealth-building tool

An Intro to PRSA's and Wealth Trust's

Why this matters

Running a company and building personal wealth are two different issues. Most directors address the first and leave the second to chance — drawing salary because it feels straightforward, without realising they're paying far more tax than they need to.

From April 2026, the structure available to directors who want to build wealth tax-efficiently inside a pension has changed, so it's important to unpack exactly what these changes mean & how they can used to your advantage.

Executive pensions — the single-member occupational schemes that served Irish directors for decades — came to an end in April 2026, driven by EU governance requirements under the IORP II Directive. Now, the alternative structures available are the PRSA and the Master Trust. Understanding which one fits your circumstances is where the work begins.

The tax case: salary vs. pension

Understanding the gap between tax on salary versus tax on pension is where the real value lies. The same euro routed through a pension contribution is worth significantly more than that euro drawn as salary because it hasn't been eroded at multiple points along the way.

To illustrate, drawing a salary means money passes through income tax (up to 40%), PRSI (4% employee + 11.05% employer), and USC (up to 8%). A director earning €150,000 in salary therefore retains less than half after tax.

Making an employer pension contribution, into either a PRSA or Master Trust, means the company pays directly into a Revenue-approved structure. The contribution qualifies as a tax-deductible business expense, reducing the company's corporation tax bill. Provided the contribution stays within Revenue limits, no income tax, no PRSI, and no Benefit-in-Kind arises for the director, so the fund grows free of capital gains tax and tax on investment returns.

The two structures: PRSA and Master Trust

PRSA (Personal Retirement Savings Account)

The PRSA has become the most straightforward successor to the executive pension for most directors. It is portable (i.e. movable between other PRSAs and master Trusts) , flexible, and avoids the governance complexity that made IORP II compliance so burdensome for single-member schemes.

Employer contributions to a director's PRSA are a deductible business expense and attract no Benefit-in-Kind (BIK), provided they stay within the Revenue cap of 100% of the director's salary in that tax year. Contributions above that limit become a BIK for the director and lose their deductibility for the company. This cap is a material constraint for directors planning large catch-up contributions.

Personal contributions attract income tax relief at the marginal rate (up to 40%), within age-related percentage limits applied against a Revenue earnings cap of €115,000:

Age	Maximum personal contribution (% of earnings cap)
Under 30	15%
30–39	20%
40–49	25%
50–54	30%
55–59	35%
60 and over	40%

Note that employer contributions to a PRSA do not eat into these personal limits — both run in parallel.

Master Trust

A Master Trust is a pooled occupational pension scheme that allows multiple employers to participate under a shared governance framework — satisfying IORP II requirements without the costs of running a standalone scheme.

For directors seeking to contribute at a higher level than the PRSA's 100%-of- salary cap allows, a Master Trust can be the more appropriate structure. Contribution levels are determined by a funding test — broadly, the level of funding required to deliver the maximum approvable retirement benefit — which can permit contributions substantially above the PRSA cap where circumstances justify it.

The Standard Fund Threshold

The Standard Fund Threshold (SFT) is the lifetime limit on pension benefits from Irish pension arrangements. For 2026, the SFT stands at €2.2 million — the first increase since 2014, following a decade of the limit being frozen at €2 million.

The SFT rises by €200,000 per year through to 2029, when it reaches €2.8 million. From 2030, it will be adjusted annually in line with average earnings growth. Funds above the SFT at the point of drawdown are subject to Chargeable Excess Tax at 40%.

Monitoring accumulated fund value against the SFT, particularly where a director holds multiple pension arrangements across their career, requires ongoing planning and should be addressed well in advance of any retirement date (ideally 5 years before the anticipated date of retirement).

At retirement: how you get your money

Lump Sum Calculations

Master Trusts offer either a lump sum based on salary and years of service (with the balance used to purchase an annuity/income for life), or a lump sum of up to 25% of the fund value.

PRSA's also offer a lump sum of 25% of the fund value. Up to €200,000 can be taken completely tax-free (a lifetime limit across all pension arrangements), the next €300,000 (i.e. the tranche between €200,001 and €500,000) is taxed at 20%, and anything above €500,000 is taxed at the marginal rate. The balance of the fund can be taken as a once off taxable lump sum and used to buy an annuity (income for life) or most frequently, transferred into an Approved Retirement Fund (ARF). ARF's gives the holder ongoing control over the invested assets and the ability to either draw down income on their own schedule or continue to grow the fund, subject to minimum withdrawal rules from age 61.

Where directors frequently get it wrong

The most common mistakes aren't about bad decisions — they're about late ones, and ones made without a clear picture of the full landscape.

Mistake #1: Assuming the old structures still apply.

The April 2026 transition was a firm deadline. Directors who haven't yet moved their executive pension need to act — or face their scheme being frozen, with no further contributions and limited investment flexibility. If this transition hasn't been completed, it needs immediate attention.

Mistake #2: Defaulting to a PRSA without testing the Master Trust case

For higher earners making significant contributions, the 100%-of- salary PRSA cap may be more restrictive than it first appears. The Master Trust funding test can open considerably more headroom that compounds materially over ten or fifteen years, so don't default to a PRSA without testing your options.

Mistake #3: Treating the Standard Fund Threshold as a distant problem

With the threshold rising but still capped, directors with long contribution histories and strong investment performance can approach the SFT sooner than expected — particularly if they have defined benefit entitlements from earlier employment that count against the limit. Starting the process at least 5 years ahead of your retirement age will keep you ahead of the game.

Mistake #4: Ignoring the interaction with salary structure

The PRSA's employer contribution cap is tied directly to salary. Directors who draw minimal salary may inadvertently constrain the company's ability to make meaningful pension contributions. Make sure that your remuneration structure and pension strategy are designed together.

Mistake #5: Starting the planning at retirement rather than a decade before it.

Options narrow significantly in the final years. The most effective pension strategies for directors are built over time, reviewed regularly, and adjusted as circumstances change. Don't procrastinate on this - it's immeasurably important.

One Final Piece of Advice

The underlying tax advantages of pension saving for Irish company directors remain substantial:

1. Employer contributions are corporation tax deductible,

2. Growth in the fund is tax-free, and

3. The retirement exit is structured to minimise personal tax.

But, making the most of your pension as a company director isn't straight forward. Recent changes have added to the complexity of choosing the right structure, calibrating contributions correctly within Revenue limits, and managing the SFT trajectory over time, so it's imperative to get specialist advise to make sure that you're maximising your circumstances.

Alchemi Financial Services works with company directors and business owners to build pension structures that are correctly designed from the outset — and that sit within a broader financial plan covering remuneration, tax strategy, investments and long-term wealth. As a fee-based practice regulated by the Central Bank of Ireland, Alchemi's focus is on the architecture of the arrangement, not the product. Our work often surfaces both underused capacity and risks that need addressing before they become expensive.

In conclusion, here's the core principles, plainly stated

• Employer pension contributions are corporation-tax deductible and attract no PRSI or BIK within Revenue limits.

• Investment growth inside the fund is entirely tax-free.

• Executive pensions ended in April 2026; the successors are PRSAs and Master Trusts — each with different contribution rules and funding approaches.

• PRSA employer contributions are capped at 100% of the director's salary per tax year from January 2025.

• Master Trusts allow funding test-based contributions, which can significantly exceed the PRSA cap for high earners.

• The Standard Fund Threshold is €2.2 million for 2026, rising to €2.8 million by 2029.

• Structuring this correctly requires a plan, not just a product.

• To make the most of your pension, seek specialist advise from an experienced Financial Advisor.

The tax advantage previously held within an executive pension hasn't gone anywhere, but what has changed is that accessing it now requires a more deliberate choice. That choice is worth getting right because it compounds significantly when started early, is structured correctly, and is reviewed regularly - it's a hugely powerful wealth building tool that you can't afford to ignore. Alchemi Financial Services

Wealth | Life | Balance

Alchemi Financial Services is regulated by the Central Bank of Ireland (C180657). This guide is for information purposes only and does not constitute financial advice. Directors should seek personalised advice before making pension decisions.