Solicitors: ensure retirement plans add up

Solicitors should ensure that their pension arrangements reflect how their practice is structured and how they are remunerated, a Dublin Solicitors Bar Association (DSBA) Practice Management webinar has heard.

The options and tax treatment can differ depending on whether a solicitor is an LLP partner, a company director, a PAYE employee or operates through a separate services company, Des Dillon (Engage Financial Solutions) explained (13 October).

How income is received also matters: salaries, partnership drawings, dividends and employer contributions do not necessarily qualify for pension relief in the same way.

Solicitors should therefore review their remuneration arrangements alongside their pension contributions, rather than treating the two separately.

For partners and practice owners, pension planning should also form part of wider business planning.

Cash flow

This includes considering how pension funding fits with cash flow, admitting new partners, buying out retiring partners or selling a practice.

Solicitors approaching retirement or planning a practice exit should factor these limits into their financial planning and seek appropriate advice on the timing and structure of their pension benefits.

“Pensions today are still pound for pound the best investment tool,” Dillon said.

However, deferred pensions, personal pensions, PRSAs, and retirement funds all have different tax treatments, different structures, and different applications for the self-employed, PAYE and company directors.

Marginal rate

Personal contributions may qualify for income tax relief at the contributor’s marginal rate, subject to Revenue rules and limits.

For a higher-rate taxpayer, a qualifying €10,000 contribution could have an effective cost of €6,000 after 40% tax relief, assuming sufficient tax liability.

Pension investments generally grow without annual personal income tax or capital gains tax on investment returns within the fund.

Retirement benefits may include a tax-free lump sum, subject to applicable limits and conditions. Employers can also contribute to employees’ or directors’ pension arrangements.

The appropriate approach depends on individual circumstances, retirement timelines and appetite for investment risk.

Financial adviser

Dillon recommended regular reviews with a financial adviser.

Approved retirement funds (ARFs) have been the most used retirement product over the last decade but increasingly there is a move towards personal retirement savings accounts (PRSAs).

Noting the increased popularity of staging retirement in different ways, Dillon stressed the importance of planning to create the possibility of drawing down lump sums at different stages.

“With interest rates changing, the annuity has come back into the conversation,” he said. 

Incredible returns

“There are incredible returns in the market if you're in the right fund at the right time”, Dillon said.

“In pension investing, we always quote the time in the market versus timing in the market,” he commented.

The level of risk should reflect the time remaining until retirement, financial objectives and ability to withstand market fluctuations.

Dillon flagged that many investment managers are suggesting “slightly negative outlooks for 2027, 2028.

Buying in the dip

“If we do potentially hit a period of fall in the markets in the next year, regular premium contributions are always a safer place to be because you'll be buying in the dip,” he said, whereas a single-premium contribution is exposed to market movements from the point of investment, making the timing and suitability of the investment important considerations.

Speaking about the state-sponsored pension scheme, My Future Fund, introduced in late 2025, Dillon described it as “a low-risk, low-return fund” in which money invested over the next decade or so “will not return what would generally be accepted as normal market returns.

“They will be below it based on the risk profile of those funds that they're investing in.”

Dillon described the scheme as a positive step for employees who might not otherwise save for retirement but said workplace or company pension arrangements may offer greater flexibility over contribution levels and investment choices.

The next opt-out window will be in July or August 2027.

Dillon flagged that starting a separate workplace or personal pension does not automatically stop My Future Fund contributions.

Pension adjustment order

In family law cases, early identification of pension arrangements is key, particularly where a pension adjustment order is being considered.

A pension inventory should include current and deferred schemes, PRSAs, AVCs, overseas pensions and the client’s State Pension contribution record.

Specialist actuarial calculations should be sought where required.

In probate, pension scheme rules, beneficiary options and potential tax consequences should be checked as part of succession planning.

And, in employment cases, contracts and pension arrangements may also need review, particularly as people work longer.

With the deadline for filing the 2025 Form 11 approaching, Dillon highlighted several considerations for those making single-premium pension contributions to obtain tax relief for the year.

Key points include:

Check the pension product qualifies for 2025 tax relief,

• Apply correct age-related limit as the maximum percentage of relevant earnings eligible for relief increases with age,
• Observe the earnings cap: The €115,000 limit applies when calculating the maximum relevant earnings eligible for relief,
• Separate personal and employer contributions,
• Check payment arrangements: Bank transfer limits may prevent a single payment, requiring contributions to be spread over several days,
• Use the correct reference: Include the policy number to avoid delays in allocating the payment and issuing a receipt,
• Allow processing time: Pension administrators face high volumes of contributions at year-end, so avoid leaving payments until the last minute.