An occupational pension scheme is a highly rewarding company incentive whereby both employee and employer contribute towards the employee's retirement fund. Whether you're an employee or an employer, there are many benefits of an occupational pension scheme. 

Company pensions can generally be categorised as being defined benefit (DB) or defined contribution (DC). 

As mentioned, company pensions can generally be categorised as being either defined benefit (DB) or defined contribution (DC). There is often confusion around the difference between a DB and a DC pension plan, so let’s look at both options.

Defined Contribution Pension Scheme: 

• A defined contribution pension (DC) is an accumulation of funds that makes up a person's pension pot. A person contributes a portion of their salary to a pension scheme. Ideally, although not always, their employer also contributes to the retirement fund.
• The contributions are invested in various financial instruments based on the employee's investment choices.
• The eventual retirement benefit depends on the total amount contributed and the performance of the investments.
• At retirement, the accumulated funds are used to purchase an Approved Retirement Fund (ARF) or annuity or provide a lump sum to the employee.
• The employee has more control over their retirement savings but also bears the investment risk. 

Defined Benefit Pension Scheme: 

• A defined benefit pension plan (DB) sets out the specific benefit that will be paid to a retiree. 
•  This calculation takes into account factors such as the number of years an employee has worked and their salary, which then dictates the pension and/or lump sum that will be paid on retirement.
• The employer is responsible for managing the investments and ensuring there are sufficient funds to meet the promised benefits.
• The employee receives a fixed amount or a percentage of their final salary as a pension during retirement, regardless of investment performance.
• DB schemes can provide more certainty and stability for employees, as the retirement benefit is predetermined. 

In summary, a defined contribution pension scheme relies on individual contributions and investment performance, while a defined benefit pension scheme guarantees a specific retirement benefit when an employee reaches retirement. 

For the employee, occupational pensions are good news not only because they are a tax efficient way of saving for retirement, but also because the pension has the potential to grow quicker as a result of employer contributions.

Tax relief is one of the great advantages that comes with having a pension. In contrast to a savings account, contributions to a pension plan qualify for tax relief which could be at either 20% or 40%, depending on your tax bracket.

For example, if you’re on the 40% rate of income tax, every €100 you contribute to your pension would only cost you €60 after tax relief.

While starting early is preferable, it's never too late to start an occupational pension. In fact, the older you get, the more you can put in, as there are different contribution limits for tax relief for different ages. For example, someone aged 34 could put 20% of their annual income into their pension and save tax. But if aged over 50, the limit rises to 30%. It rises again to 40% if over 60.

If you want to see the tax relief available for your pension contributions use our tax relief calculator to calculate what your pension contribution may cost after tax relief.

Starting a pension can give you greater ownership of your future, and putting a little aside today, could help you live an active and productive retirement tomorrow. 

How much you save into your pension is entirely up to you. What kind of lifestyle you would like in retirement and how much you can afford to save are the two main factors to consider. The earlier you start your pension, the better. Even small contributions now can make a huge difference in the future, and once you get into the habit of saving each month, it becomes a lot easier.

Close to one third of workers aged between 20 and 69 have no private pension cover and will depend on the State pension in retirement₃, which means, the value of an occupational pension to employees cannot be overstated.

If you work for a company and they provide you with the option of a pension plan, there is the possibility that the company also contributes to the plan which is good news and could potentially increase your pension savings. Plus, if the company you work for provides a company pension scheme, they will be able to advise you on the options available to you.

For an employer who provides an occupational pension scheme to its employees, from a HR perspective it acts as a good incentive for new employees thinking of joining the company and as a means of staff retention and motivation for existing employees. 

In addition, company employers who choose Zurich Master Trust will enjoy all the benefits of Zurich’s company pension expertise, without the need to appoint their own trustee boards to manage the associated governance and compliance requirements.

There are age-related contribution limits that apply to the income tax relief available against pension contributions made by you (whether you are self-employed or a member of a company pension scheme), as follows: 

The age-related limits only apply to your earnings up to €115,000, which means there’ll be no income tax relief on earnings over this amount, if you’re maximising your percentages. Employer contributions to an employee's scheme are not taken into consideration when calculating the employee's earnings threshold, so any tax relief on annual pension contributions are for employee only contributions and does not take into account any employer contributions.

In general, you have four main options depending on your circumstances: 

1. You may be able to leave your pension where it currently is. 
2. Transfer your pension to your new employer’s scheme or transfer it to a Personal Retirement Savings Account (PRSA).
3. Move your pension into an account in your own name. This is called a Personal Retirement Bond (PRB) or a Buy Out Bond (BOB).
4. Transfer to your new employer’s arrangement, where applicable.

Everyone’s financial situation is different so it’s important to speak with your financial advisor to look at the options and find the right one for you and your circumstances. 

If you are an employer, providing a Company Pension Plan to your employees is not only tax efficient but is also a means of attracting new and retaining existing employees. We offer Group Pension, Group PRSA and Fusion arrangements. 

If you are an employee, ask your employer if they have an occupational pension scheme in place for you to join. Don't worry if they don't provide an occupational scheme because there are still plenty of other options available including personal pensions and PRSAs.