Salary gets hit for income tax, USC and PRSI — potentially over 50% at the margin. Dividends fare no better. But an employer pension contribution moves company money into your personal wealth with no income tax, no USC, no PRSI, no benefit-in-kind — and a corporation tax deduction for the company on top.
For decades, the vehicle for this was the executive pension plan. Then IORP II arrived, providers stopped writing them, and directors were pointed towards two successors: the master trust and the PRSA. Most directors ended up in one or the other without anyone properly explaining the difference — and the difference can be worth hundreds of thousands of euro.
What happened to executive pensions?
The EU’s IORP II Directive, transposed into Irish law in 2021, imposed full governance requirements on even one-person pension arrangements. Running a standalone one-member scheme for a single director became commercially unviable, so life companies closed their executive pension books and moved the business into master trusts — large umbrella schemes run by professional trustees, in which your arrangement sits as its own ring-fenced section.
Functionally, an executive master trust arrangement does what the old executive pension did: it’s an occupational scheme, sponsored by your company, funded by employer contributions, for your benefit. The governance is handled centrally by the professional trustee. You get the structure without the compliance burden.
Why the master trust matters for executives specifically
The advantages for an owner-director go well beyond what an ordinary scheme member sees.
- Funding power that PRSAs can no longer match. This is the big one. Master trust contributions are governed by Revenue’s maximum funding rules — calculated on your salary, service, age, and existing benefits. For a director in their 50s with long service and modest existing provision, those rules can justify very substantial employer contributions, sometimes multiples of salary in a single year. PRSAs briefly enjoyed unlimited employer funding after Finance Act 2022, but that window closed: employer PRSA contributions are now capped at 100% of salary per year. For aggressive late-stage funding — the classic “profitable company, under-pensioned director” scenario — the master trust is once again the standout vehicle.
- Extraction without the tax toll. Every euro your company contributes bypasses income tax, USC, PRSI and BIK entirely, and the company claims a corporation tax deduction (spread over up to five years for very large contributions). Compare that with drawing the same money as salary and reinvesting what’s left after 52% deductions. The arithmetic isn’t close.
- Retirement access from 50. As an occupational arrangement, a master trust can allow benefits from age 50 where you’ve severed ties with the sponsoring employment — a genuine option for directors selling or winding down a business. You’ll want advice before touching it early, but the flexibility exists.
- Creditor protection and estate planning. Pension assets sit outside the company. If the business hits trouble, properly funded pension benefits are generally beyond the reach of company creditors. On death before retirement, a lump sum of up to four times salary can pass to your estate, with the balance typically providing for dependants — a structure worth understanding in detail if family protection matters to you.
- Room to grow into the new thresholds. The Standard Fund Threshold — the ceiling before punitive tax applies — is rising in stages from €2 million towards €2.8 million by 2029. For high earners who’d previously stopped funding because they were “near the limit,” the goalposts have moved. Many directors have more headroom than they think.
The honest caveats
You take the trust as you find it. The old executive pension gave you and your adviser significant control. In a master trust, the trustee, the fund menu, and the administration standards are set centrally for thousands of members. Self-administered flexibility — direct property, exotic assets — generally isn’t on the menu. Directors who want that level of control need a different conversation.
The trustee and the provider are usually related. Most Irish master trusts are run by entities connected to the investment provider. Safeguards exist, but independent scrutiny of your charges is your job — or your adviser’s.
Charges vary wildly at the executive level. Two directors, similar funds, same master trust — materially different annual charges, because one had terms negotiated and one took the default. On a fund heading for seven figures, a small percentage difference compounds into serious money.
The PRSA still wins some cases. Younger directors, those on lower salaries, or anyone prioritising simplicity and portability may be better served by a PRSA — particularly since PRSAs avoid some occupational scheme restrictions. The right answer depends on your age, salary, service history and existing benefits. Anyone who tells you one vehicle wins every time is selling that vehicle.
The executive funding check
Five questions every director should be able to answer:
- What would Revenue’s maximum funding rules allow your company to contribute for you this year — the actual figure?
- Are you in a master trust or a PRSA, and did anyone model both before you signed?
- Is your investment strategy built around your exit plan — sale, succession, ARF at 60, access at 50?
- When did you last review any of this?
If you hesitated on question one, you’re in good company — most directors have never seen their maximum funding calculation. And that calculation is frequently the single most valuable number in their financial life, because it defines exactly how much company profit can be converted into personal wealth at effectively no tax cost.
Why now?
Corporation profits sitting in your company are earning little and exposed to everything — trading risk, future tax changes, and eventually CGT or income tax on extraction. Every year of unused pension funding capacity is capacity you may not get back, because the calculation depends on years to retirement. Directors in their late 40s and 50s are in the peak window right now.
What to do next
At Secure Your Future, we specialise in pension and retirement planning for company directors and senior executives across Ireland. An executive pension review with us covers:
- Your personal maximum funding calculation under Revenue rules — the number that matters
- A master trust vs PRSA comparison modelled on your actual salary, service and goals
- A benchmark of your existing charges against current market terms
- An extraction and exit strategy: lump sums, ARF planning, and timing benefits around a business sale
Some directors discover they’re already well set. Most discover unused capacity worth more than any other tax planning available to them.
Book your executive pension review
Ten minutes to arrange. The downside is confirmation you’re on track. The upside is finding the most tax-efficient euro your company will ever pay you.
