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Occupational pension

What is an occupational pension and what are your options?

An occupational pension is a scheme set up by your employer to help you save for retirement. There are two main types: Defined Contribution (DC) schemes, where the amount that you get depends on how much you and your employer pay in and how the investments perform. And Defined Benefit (DB) schemes, where the amount that you get is based on your pay salary and how long you worked for the company. These are less common. If your employer does not offer an occupational pension, they must give you access to a standard Personal Retirement Savings Account (PRSA) instead.

You can boost your pension by making Additional Voluntary Contributions (AVCs) or through a PRSA if your scheme allows. At retirement, you can usually take a tax-free lump sum, receive an annuity, transfer funds to an Approved Retirement Fund (ARF) or take a taxable lump sum. For more details, visit the Pensions Authority of Ireland’s website. Understanding your scheme rules and reviewing your options ahead of time can help you make informed decisions about your pension.

Types of Occupational Pension

Occupational pension schemes are set up by employers to provide pensions for employees. There are two main types:

  • Defined Contribution (DC) schemes: You and your employer pay-in. Your final pension depends on those contributions and on investment growth.

  • Defined Benefit (DB) schemes: Your pension is based on your salary and years of service, but benefits may be reduced if the scheme has a funding shortfall. These schemes are also becoming less common.

If your employer does not provide access to an occupational pension scheme or does not let you join, they must give you a chance to save with a standard PRSA.

How to boost your occupational pension?

When reviewing your pension, you may look at ways you can add to your pension fund so that you can get a bigger income later.

You can only make Additional Voluntary Contributions (AVCs) to your employer’s occupational pension scheme if the rules of that particular pension scheme allow AVCs. If not, then your employer must offer you a Personal Retirement Savings Account (PRSA) to allow you make extra payments.

Additional Voluntary Contributions (AVCs)
If your employer allows AVCs through their occupational pension scheme, you don’t have to use it. You can choose a PRSA and make extra payments there.

Buying back missed contributions
If you have taken a career break or unpaid leave, you may be able to buy back missed pension contributions by purchasing “notional service” or “added years.” This allows you to make up for gaps in your pensionable service, so your retirement benefits are not reduced. 

The option to buy back service is mainly available to civil and public servants who will have less than 40 years of service at retirement age. The cost depends on the number of years you want to buy and your age. You should contact your employer or pension administrator for details on if you qualify, costs and the process for your pension plan.

What are your options at retirement?

At retirement, you can:

  • Take a tax-free lump sum of cash
  • Use your pension to buy a guaranteed income (an annuity) for life
  • Transfer funds to an Approved Retirement Fund (ARF) to draw an income from
  • Take a taxable cash lump sum

Find more information on the Pensions Authority of Ireland’s website.

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