What Is an Occupational Pension in Ireland? How Does It Work?

Occupational pension schemes are set up by employers to help their employees save for retirement.

Offering one shows you care about your team’s future and can make your business a more attractive place to work.

Let’s understand occupational pension schemes in detail. We’ll cover their types, how they work, employer responsibilities, and how you can offer a compliant occupational pension in Ireland. 

What Is an Occupational Pension Scheme in Ireland?

An occupational pension scheme is a savings plan employers set up to help their employees have an income when they retire. It’s also known as a company pension plan. 

As an employer, you can contribute to your employees’ pension pots on their behalf or set up a scheme that requires contributions from both you and your team. Many schemes also allow employees to take a portion of their pension savings as a tax-free lump sum when they retire, subject to the scheme and Revenue rules and limits.

In Ireland, the Pensions Authority (formerly the Irish Pension Board) regulates these schemes to ensure they comply with national standards and protect both employers and employees.

Should Employers Offer Occupational Pension Schemes in Ireland?

While Irish employers are not currently required to provide an occupational pension scheme, this will change with the introduction of the Auto Enrolment (AE) pension scheme in September 2025.

Many employers already offer occupational pensions as part of their benefits package for good reasons:

• Attract and retain skilled talent: Offering a pension scheme gives you a competitive edge in hiring. Employees value companies that invest in their long-term financial security, which can encourage loyalty, reducing turnover and associated costs.

• Tax benefits: Employer contributions to occupational pension schemes in Ireland are generally tax-deductible, reducing the employer's overall tax liability.

• Boost employee morale: Providing a company pension scheme shows your team that you value their future. This can improve morale, job satisfaction, and productivity across your workforce.

If you’re not already offering a pension scheme, the upcoming Auto Enrolment system will introduce legal requirements that you need to prepare for, such as: 

• All eligible employees will be automatically enrolled in the Auto Enrolment scheme. 

• Both the employer and employees will be legally required to contribute a fixed percentage of their earnings to the employee’s auto-enrolment pension pot.

Want to learn more about automatic enrolment? 

Download our detailed Irish Auto Enrolment Guide.

How Does an Irish Occupational Pension Scheme Work?

As an employer, you engage with a company like Kota or directly with a pension provider. 

You determine how much you want to contribute on your employees' behalf and decide whether they will also need to contribute. Once you’ve made that decision, you will typically complete an application form, known as a trust deed.  

Members of an occupational pension scheme fall into one of three categories: 

• Active members: Your employees who are making regular contributions.

• Deferred members: Your former employees who have left your organisation and stopped contributing to the pension scheme but are entitled to receive their pension benefits in the future.

• Pensioners: Members who have retired and are now receiving regular pension payments.

Sometimes, trustees may take help from an insurance company or a pension service provider to handle operations while acting as a watchdog to ensure members and employers comply with the scheme’s rules and regulations. 

The scheme's trustees must also protect members' pension rights while managing the scheme.

The contributions depend on the type of occupational scheme. 

What Are the Types of Occupational Pension Schemes in Ireland?

As an employer in Ireland, you can choose from several types of occupational pension schemes to support your employees’ retirement savings. 

In general, these schemes can be grouped into:

• Defined Contribution (DC) and Defined Benefit (DB) Pensions

• Funded and Unfunded Pensions

• Hybrid Pensions

Here is an overview of each type of pension:

1. Defined Contribution (DC) and Defined Benefit (DB) Occupational Pensions

a. Defined Contribution Pension Scheme

• A defined contribution (DC) pension scheme is the most popular type of occupational pension in Ireland. A 2024 survey by Ireland’s Central Statistics Office shows that 69% of occupational schemes are defined contribution schemes.  

• In a defined contribution scheme, contribution rates are fixed in advance. Employees and their employers contribute a percentage of their monthly earnings to the pension fund. 

• While DC schemes don’t guarantee the level of benefits your employees will receive at retirement, they clearly define how much you, as the employer, will contribute to the pension fund. 

• Some schemes typically require employees and employers to make matching contributions to the pension fund, such as 5% of their monthly earnings. 

• However, employee contributions aren’t always necessary. In some cases, the employer contributes to the employee’s pension pot without the employee's participation.

Want to offer your employees a flexible defined contribution pension scheme? 

Explore Kota’s occupational pension solution. 

b. Defined Benefit Pension Scheme

• In a defined benefit (DB) pension scheme, your employee’s pension benefits are defined from the beginning and depend on the length of their service and their salary when they retire.

• Irish employees can contribute a pre-approved amount to their DB scheme. 

• However, you (the employer) must contribute the remaining amount if there’s an insufficient amount or shortfall in the pension pot when your employee retires.

2. Funded and Unfunded Occupational Pensions

a. Funded Pensions

• Employers and employees contribute a fixed percentage of their monthly income towards a company pension plan in a funded pension scheme.

• The scheme's trustees add these contributions to a trust fund established outside the company to cover the payment of retirement benefits. This ensures the assets are available to pay members' pensions if the employer goes out of business.

b. Unfunded Pensions

• Your employees don’t make pension contributions in an unfunded pension scheme. Instead, you pay out the benefits your employees are entitled to whenever they are due alongside their regular salary. 

• This type of arrangement is called 'pay as you go' — employees don’t pay contributions in unfunded plans, and employers don’t have to set up a trust. 

• These schemes are typically available to civil servants, teachers, Gardaí, and other government employees.

3. Hybrid Occupational Pensions

A hybrid occupational pension scheme combines elements of defined contribution and defined benefit schemes. 

Popular hybrid benefit schemes include:

• Underpin Scheme: Your employees can receive benefits based on a DB or a DC scheme. When your employees retire, they will receive the higher benefit out of the two. For example, an underpin scheme might have the employer and employee contributing 6% each to a plan with a guaranteed minimum pension of 1% per year for the length of their service at retirement.

• Self-annuitising DC Scheme: These schemes operate similarly to a DC scheme until your employee retires. Post-retirement, the accumulated amount is converted into pension income based on the scheme’s rules instead of the market (annuity) rates. 

• Final Salary Lump Sum Scheme: Your employees can collect the retirement benefit as a lump sum at retirement rather than regular pension payments. As per Revenue rules, the level of lump sum benefits provided is calculated based on the employee’s length of service and final salary with the employer. 

For more information on the types of occupational pension schemes, check out the Pension Authority’s handbook.

Who Can Join Irish Occupational Pension Schemes?

As an employer in Ireland, you can typically include anyone you employ in your occupational pension scheme as long as they meet your scheme’s rules (e.g., minimum service or hours). 

This usually covers both full-time and part-time employees. 

In some cases, it can also include your former employees (deferred members) who still have benefits in the scheme.

Employees on Temporary Absence or Secondment

You can maintain pension scheme membership for your employees who are temporarily absent (for example, on secondment) if:

• They remain Irish residents.

• There is a clear expectation they will return to your employment.

• They do not join another approved pension scheme during their absence.

Your employees can stay in your pension scheme for up to five years of temporary absence. If the absence lasts over five years, you (or your scheme trustees) must notify Revenue.

Directors of Investment & Property Rental Companies

If you run a company that is treated as an investment company for tax purposes and a director owns or controls 20% or more of the shares, that director cannot join an occupational pension scheme.

Exception: If your “investment” company actually serves as a holding company for a group of trading companies and coordinates the group’s activities, directors’ remuneration may be considered pensionable, allowing them to join the scheme.

Persons Under Schedule-D

Those assessed under Schedule D (e.g., sole traders, consultants, and other self-employed professionals) cannot join your occupational pension scheme.

Such individuals typically make their private pension arrangements, such as PRSAs (Personal Retirement Savings Accounts) or Retirement Annuity Contracts (RACs).

When Can an Employee Claim Their Occupational Pension?

In most Irish occupational pension schemes, employees can access their benefits once they reach the scheme’s Normal Retirement Age (NRA), which is often 65 (though some schemes set a different standard age). 

However, there are also circumstances, such as ill health or early retirement options, under which your employees can draw down their pension sooner. 

In such cases, employees can access their funds from 50 as long as they have retired. 

Ensure your scheme handbook or documentation clearly states the Normal Retirement Age and any provisions for early retirement. 

Read more about the Retirement Age in Ireland. 

Retirement Options for Employees

Once an employee retires, they typically have the following choices:

• Taking a Tax-Free Lump Sum: Your employee can withdraw a portion of their accumulated fund as a tax-free payment, subject to Revenue limits and scheme rules.

• Receiving a Pension Through Annuity: A retirement annuity is a regular pension income purchased with all or a portion of the retirement fund.  In exchange for transferring the retirement funds to a life assurance firm, the company will pay employees a guaranteed monthly income for the rest of their lives.

• Transferring the Retirement Savings to an ARF: An Approved Retirement Fund (ARF) is a personal retirement fund where your employee can invest their pension fund after getting it as a lump sum payment. They can withdraw money from it regularly.

• Providing for Dependents: If the employee dies in service or post-retirement, their dependents may receive a lump sum or a dependent’s pension, depending on your scheme’s provisions.

Are Occupational Pension Schemes Taxable in Ireland?

As legal entities, occupational pension schemes in Ireland are generally exempt from tax on their investment returns.

However, employees still pay Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) on their gross earnings (i.e., before pension deductions). 

When an employee retires, their pension income is subject to income tax and USC, which the pension provider (typically the employer or pension scheme trustees) deducts and remits to Revenue. 

Retirees aged 66 or over typically no longer pay PRSI on their pension payments.

Tax Relief in Occupational Pensions 

Any employer contributions can be offset against corporation tax at 12.5%. 

Employee contributions to occupational pensions can receive tax relief at your employee’s marginal tax rate (20% or 40%), subject to Revenue limits based on their age and earnings. There is no relief from PRSI or USC.

Explore our detailed guide about Tax Relief on Pension Contributions for more information. 

Manage Irish Occupational Pension Schemes Effortlessly with Kota

Offering your employees a quality occupational pension scheme is one of the most effective ways to attract and retain talent. It can also exempt you from the Auto Enrolment scheme. 

However, administering a pension plan can feel daunting — especially when juggling compliance, enrolment, and day-to-day management. 

Kota streamlines the entire process so you can focus on running your business.

What Is Kota?

Kota is a modern retirement benefits platform that empowers you to:

• Enrol and manage pension benefits without paperwork, saving time and resources.

• Offer a flexible and portable DC pension scheme — the Irish Life EMPOWER Personal Lifestyle Strategy.

• Match contributions at a level you choose (e.g., 5% employer match) for a more attractive benefits package.

• Integrate seamlessly with your existing HR and payroll software, reducing admin tasks and costs.

This makes it easy to roll out an occupational pension scheme that’s fully compliant, scalable, and user-friendly for both you and your team. 

Join Kota today and secure your team’s financial future! 

7 FAQs on Occupational Pension Schemes in Ireland

Let’s tackle some common queries around occupational pensions:

1. Can Employees Get State Pension and Occupational Pension?

Yes. Your employees can receive both a State Pension and an occupational pension simultaneously. These are separate entitlements, so drawing one does not affect eligibility for the other.

Learn about the Contributory State Pension and State Pension (Non-Contributory) in our detailed guides.

2. Are Occupational Pensions Subject to PRSI?

Employees under 66 may be liable for PRSI on pension income at a particular rate or class. 

Once they reach 66, pension income usually falls under PRSI Class M, which is 0%, effectively exempting them from PRSI. 

The scheme itself is not subject to PRSI on its investments or contributions.

3. What Are Additional Voluntary Contributions (AVCs)?

AVCs are extra, optional payments employees make to boost their retirement benefits. 

They often appeal to those wanting a higher pension or wishing to maximise their tax relief within Revenue limits.

Check out our AVCs in Ireland guide for a deeper understanding. 

4. How Is an Occupational Pension Paid?

Occupational pension payments are typically made monthly and depend on the specific scheme rules. Some schemes allow employees to receive a tax-free lump sum when they retire, subject to the scheme and Revenue rules.

5. What Happens to an Employee’s Occupational Pension if They Move Abroad?

If your employee leaves you and moves abroad after contributing to the company pension plan, they have two options:

• Leave their retirement savings in Ireland: Your employee can keep their savings in your pension scheme (with trustee approval) or transfer them to a PRSA if they have fewer than 15 years of membership. If they retire outside of Ireland, they can access their savings from age 50, with consent from the employer and trustees.

• Transfer their savings overseas: Your employee can transfer their pension savings to a pension scheme in the country they’re relocating to. However, depending on the regulations of that country, the employee may have to meet certain restrictions or conditions.

6. What Are the Employer’s Pension Obligations if an Employee Is Terminated?

When you terminate an employee, you must provide specific information about the pension plan, as per the rules set by the Pensions Authority.

For example, in a defined contribution scheme, you must inform the employee about:

• The total value of employer contributions paid on behalf of the employee.

• The rights and claim options available to them when leaving service.

• The procedure for claiming pension benefits.

On the other hand, in a defined benefit pension scheme, you must inform them about:

• When their benefits will be paid.

• The amount of preserved benefit the employee is entitled to upon retirement. 

• Any other extra benefits to be paid to the employee under the pension scheme rules.

 Scheme rules will dictate whether benefits remain in the scheme or can be transferred out.

7. Can Employees Preserve or Transfer Their Pension Benefits?

Yes. Employees can leave (“preserve”) their accrued benefits in your scheme or transfer them to another approved arrangement, such as a new employer’s plan, a PRSA, or a personal pension, provided it meets Revenue requirements. 

This flexibility ensures employees can maintain continuity in their retirement savings, even when they change jobs or become self-employed.

Empower Your Employees with Occupational Pensions in Ireland

Occupational pensions in Ireland are a win-win for employers and employees.  

Employees gain financial security for retirement, while employers enjoy tax advantages and foster a loyal, engaged team. It’s more than just a benefit — it's a wise, long-term investment in your workforce and business. 

Ready to provide a seamless pension solution for your team? 

Join Kota to enrol your employees in minutes.