Financial Planning for Company Directors Ireland

Connect your company finances with your personal financial future

Company directors often spend years building value inside a business while giving less attention to their personal financial position outside it.

Your income, pension, investments, insurance, business ownership and retirement plans are closely connected. A decision made by the company can have a direct effect on your personal finances and the security of your family.

At Dooley Insurance Group, we provide financial planning for company directors, business owners and shareholders across Ireland.

We help directors understand their current position, protect personal and business income, build retirement assets and prepare for the eventual transfer or sale of the company.

Arrange a Company Director Financial Review

What is financial planning for a company director?

Financial planning for a company director brings personal and business finances together within one coordinated strategy.

It can include:

• Director pension planning
• Personal Retirement Savings Accounts
• Employer pension contributions
• Retirement planning
• Personal investments
• Life insurance
• Income protection
• Executive income protection
• Specified illness cover
• Key person insurance
• Shareholder protection
• Business loan protection
• Succession planning
• Business exit planning
• Family financial protection

The purpose is to ensure that the success of the company helps create lasting financial security for the director and their family.

Why company directors need a different financial plan

A company director may receive income through salary, pension contributions, dividends or other company benefits.

They may also have a large proportion of their personal wealth tied to shares in the business.

This creates opportunities, but it can also create financial risk.

If the business underperforms, cannot be sold or becomes dependent on one key individual, the director’s income, retirement and family wealth may all be affected at the same time.

A director’s financial plan should consider:

• Personal and company income
• Business cash flow
• Company profitability
• Existing pension arrangements
• Personal savings and investments
• Share value
• Business borrowing
• Personal guarantees
• Family commitments
• Intended retirement age
• Business succession
• Exit strategy
• Financial protection

The company may be your largest asset, but it should not be your only financial plan.

Pension planning for company directors

A pension can form an important part of a company director’s long term financial planning.

Depending on the company structure and your circumstances, the company may be able to contribute to a qualifying pension arrangement on your behalf.

Pension planning can help you:

• Build personal retirement assets
• Separate retirement wealth from the business
• Prepare for life after the company
• Create an additional source of future income
• Reduce reliance on the eventual sale of the business
• Use available pension and tax reliefs appropriately
• Establish a more structured retirement plan

The right approach will depend on your remuneration, age, existing pensions, company position and intended retirement date.

PRSA advice for company directors

A Personal Retirement Savings Account may provide a flexible pension option for a company director.

A PRSA can accept personal contributions and, where appropriate, employer contributions from the company.

When reviewing a PRSA for a director, we consider:

• Salary and relevant earnings
• Proposed company contributions
• Personal contributions
• Current Revenue limits
• Existing pension arrangements
• Investment fund selection
• Policy charges
• Target retirement income
• Intended retirement age
• Wider company and personal financial plans

Employer PRSA contributions are subject to current Revenue rules and limits.

Large or unusual contributions should be considered alongside professional tax and accounting advice.

How much should a company director contribute to a pension?

There is no single pension contribution that is right for every director.

The appropriate level will depend on:

• Age
• Salary
• Company profitability
• Available company cash
• Existing pension value
• Retirement age
• Target retirement income
• Current Revenue rules
• Other personal assets
• Future business investment
• Need for accessible savings

A company should not make a pension contribution that damages working capital or prevents it from meeting its liabilities.

The director must also maintain sufficient personal and company liquidity outside the pension.

A pension is designed for retirement and generally cannot be accessed for short term business or personal needs.

Reviewing old pensions

Company directors may have pensions from previous employment as well as arrangements connected to their current company.

These could include:

• Former occupational pensions
• Personal pensions
• PRSAs
• Personal Retirement Bonds
• Additional Voluntary Contributions
• Previous director pension arrangements

We review existing pensions to establish:

• Current value
• Charges
• Investment funds
• Risk
• Guarantees
• Retirement benefits
• Transfer options
• Projected retirement income

It may be possible to consolidate certain pensions, but valuable benefits or guarantees should not be given up without a complete review.

Building wealth outside the company

Many business owners reinvest most of their available capital into the company.

This may support growth, but it can also leave the director with limited personal assets outside the business.

Building wealth outside the company can provide:

• Greater personal financial independence
• Diversification
• Accessible savings
• Retirement flexibility
• Reduced dependence on a business sale
• Greater family security
• Protection against business risk

A director’s personal wealth strategy may include pensions, savings, investments, property and financial protection.

The right balance depends on the company’s capital requirements and the director’s personal objectives.

Investment planning for company directors

Investment planning can help a director build personal assets that are not dependent on the performance of the company.

Before investing, we consider:

• Personal savings
• Emergency funds
• Existing investments
• Business cash requirements
• Personal and company tax liabilities
• Investment timeframe
• Attitude to risk
• Capacity for loss
• Access requirements
• Retirement plans
• Family commitments

Company money and personal money must be treated separately.

Removing or investing money through a company can have tax, legal and accounting consequences. Your accountant or tax adviser should be involved where appropriate.

Protecting a director’s personal income

A director may depend on salary, dividends or business profits to support their household.

If illness or injury prevents them from working, both their personal income and company performance may be affected.

Income protection or executive income protection may provide a replacement income following an eligible illness or injury, subject to the policy terms.

A director income protection review should consider:

• Salary
• Dividends
• Other income
• Existing sick pay
• Company ability to continue paying income
• Deferred period
• Required monthly benefit
• Policy cessation age
• Personal financial commitments
• Pension contributions
• Tax treatment

Dividends and irregular earnings may not be treated in the same way as salary when an insurer calculates the allowable benefit.

The director’s remuneration structure should be reviewed before cover is arranged.

Executive income protection

Executive income protection is arranged and paid for by a company on behalf of an eligible director or employee.

It may provide a replacement income if the insured person cannot work due to an eligible illness or injury.

Depending on the policy, cover may also be available for certain employer pension contributions or other employment benefits.

Executive income protection should be considered with the company’s accountant or tax adviser because the ownership, premiums and claim payments can have tax and payroll consequences.

Life insurance for company directors

A director’s family may depend on income generated by the business.

Personal life insurance can provide a lump sum if the director dies during the policy term and the claim is valid.

The required amount may be based on:

• Lost household income
• Mortgage
• Personal debts
• Dependent children
• Education costs
• Existing savings
• Pension death benefits
• Business value
• Existing life insurance
• Financial support required by a spouse or partner

The family should not have to rely entirely on the immediate sale of the business following the director’s death.

Specified illness cover for directors

Specified illness cover can provide a lump sum if a director is diagnosed with an illness listed in the policy and meets the insurer’s medical definition.

The payment can be used to:

• Reduce personal debt
• Pay household expenses
• Support time away from the company
• Fund treatment or rehabilitation
• Build an emergency reserve
• Reduce financial pressure during recovery

Specified illness cover protects the individual. The company may require separate key person specified illness cover to protect against the commercial effect of the director’s absence.

Key person insurance

A company may depend heavily on a director’s leadership, technical knowledge, sales ability or customer relationships.

Key person insurance can provide a benefit to the company if an insured director or employee dies or suffers another covered event.

The payment may help the business:

• Replace lost profit
• Maintain working capital
• Recruit a replacement
• Retain customers
• Repay debt
• Manage a period of disruption
• Reassure lenders
• Complete an orderly transition

The amount of cover should reflect the financial value and commercial contribution of the key person.

Shareholder protection

If a director is also a shareholder, their death can create uncertainty around company ownership.

The shares may pass to the deceased shareholder’s estate or family. The remaining shareholders may want to purchase those shares but may not have the funds required.

Shareholder protection can provide money to support the purchase of a deceased shareholder’s interest, subject to the agreed legal arrangement.

A complete shareholder protection plan should include:

• Business valuation
• Appropriate life insurance
• Specified illness cover where required
• Shareholder agreement
• Cross option or purchase agreement
• Review of the company constitution
• Legal advice
• Tax advice
• Regular valuation reviews

Insurance provides funding, but the legal agreement establishes how the shares may be transferred.

Business loan and personal guarantee protection

A director may have given a personal guarantee for company borrowing.

If the business cannot repay the debt, the lender may seek payment under the guarantee, depending on its terms and the circumstances.

Business loan or life insurance may be used to provide funds to reduce or clear borrowing following the death of an insured director.

The company’s financial review should identify:

• Commercial mortgages
• Business loans
• Director loans
• Equipment finance
• Working capital facilities
• Personal guarantees
• Other borrowing

A solicitor should explain the director’s legal liability under any personal guarantee.

Planning to sell the business

Many company directors expect the eventual sale of the business to fund retirement.

That may happen, but the final value and timing of a sale are not guaranteed.

The business may be affected by:

• Market conditions
• Profitability
• Customer concentration
• Dependence on the owner
• Management strength
• Industry change
• Debt
• Succession
• Buyer demand
• The director’s health
• Tax changes

A retirement plan should not depend entirely on achieving one future sale price.

Pensions, personal investments and savings can provide additional financial security if the sale is delayed or the final value is lower than expected.

Business succession planning

Succession planning determines what happens to the company when a director retires, dies or becomes unable to continue working.

A succession plan may consider:

• Future ownership
• Management replacement
• Family involvement
• Shareholder agreements
• Company valuation
• Sale of shares
• Employee or management buyout
• Pension planning
• Personal retirement income
• Key person insurance
• Shareholder protection
• Tax planning
• Wills and estate planning

Starting succession planning early provides more time to build value, reduce dependency on the owner and prepare the next generation of management.

Financial planning before selling a company

Before selling a business, a director should understand what the sale needs to achieve personally.

Important questions include:

• How much money is needed for retirement?
• What pensions and investments already exist?
• What tax may arise on the sale?
• Will the director remain involved?
• Will consideration be paid immediately or over time?
• Is the expected price realistic?
• What personal income will replace company earnings?
• How should the sale proceeds be managed?
• What financial protection will end after leaving the company?

Legal, accounting, tax and financial planning should begin before the sale process is advanced.

Separating personal and business risk

A director’s financial position can become overly dependent on one company.

The business may provide:

• Salary
• Dividends
• Pension contributions
• Share value
• Employment
• Family income
• Property income
• Future retirement capital

If the company experiences difficulty, several parts of the director’s financial position may be affected at the same time.

A coordinated plan can help build personal financial resources outside the company while protecting the commercial value that remains inside it.

Our company director planning process

Understanding the company

We review the company structure, ownership, profitability, borrowing and the director’s role.

Understanding the director

We assess personal income, pensions, savings, investments, family responsibilities and retirement goals.

Identifying financial gaps

We identify gaps in pensions, personal protection, business protection, savings and succession planning.

Building a coordinated strategy

We explain the financial products and planning actions that may help connect the director’s business success with their personal objectives.

Working with professional advisers

Where necessary, we coordinate with the company’s accountant, solicitor or tax adviser.

Reviewing the plan

The plan should be reviewed as company value, income, ownership and personal circumstances change.

Why choose Dooley Insurance Group?

Dooley Insurance Group has supported Irish businesses, directors and families since 1957.

Our financial services team provides advice across company director pensions, PRSAs, investments, income protection, life insurance, shareholder protection and succession planning.

This allows us to consider the director, family and company within one connected financial plan.

Our financial services team includes Conor Swan, QFA, RPA and SIA, Director, and David Renwick, Senior Financial Consultant.

With offices in Naas, County Kildare and Edenderry, County Offaly, we provide financial planning for company directors locally and throughout Ireland.

Company director financial planning questions

What is financial planning for a company director?

It is the process of connecting personal income, pensions, investments, protection, business ownership and retirement goals within one financial strategy.

Can my company contribute to my pension?

A company may be able to contribute to an eligible director’s qualifying pension arrangement, subject to current Revenue and pension rules.

Can a company contribute to a director’s PRSA?

A company may contribute to a director’s PRSA, subject to current Revenue limits and the director’s individual circumstances.

How much can my company contribute to my pension?

The amount depends on the pension type, salary, age, existing benefits, company circumstances and current Revenue rules.

Should I leave all surplus money in my company?

That depends on working capital requirements, future investment, tax liabilities and personal financial goals. Retaining all wealth in one business can create concentration risk.

Should I rely on selling my business for retirement?

A future business sale may form part of retirement planning, but the timing and value are not guaranteed. Pensions and personal investments can reduce reliance on one future sale.

What insurance should a company director have?

Depending on the circumstances, a director may need life insurance, income protection, specified illness cover, key person insurance, shareholder protection and business loan protection.

What is executive income protection?

Executive income protection is arranged by a company for an eligible director or employee and may provide replacement income following an eligible inability to work.

What is shareholder protection?

Shareholder protection provides funding that can help the remaining shareholders purchase shares from the estate of a deceased shareholder.

Do I need key person insurance?

Key person cover may be appropriate where the company would experience a significant financial loss following the death or serious illness of a director or employee.

How do I prepare financially to sell my company?

Begin by establishing your required sale value, retirement income, tax position, existing assets and plans after leaving the company.

When should succession planning begin?

Succession planning should begin well before the intended retirement or transfer date. Early planning provides more time to prepare management, ownership and personal finances.

Should my accountant be involved?

Yes. Company contributions, remuneration, investments, tax and business protection may require input from the company’s accountant, solicitor or tax adviser.

How often should a director’s financial plan be reviewed?

The plan should generally be reviewed annually and whenever company ownership, profitability, borrowing, income or family circumstances change.

Arrange a company director financial review

The value you build inside your company should support the life and financial security you want outside it.

A coordinated director financial plan can help you build retirement assets, protect income, manage business risk and prepare for an eventual exit.

Contact Dooley Insurance Group to arrange a company director financial review.

The information on this page is general and does not constitute personal financial, legal or tax advice. Pension rules, tax treatment and product availability may change. Recommendations can only be provided following an assessment of your circumstances and the products available through our agency appointments.

Dooley Insurances Ltd t/a Dooley Insurance & Mortgage Brokers and Dooley Insurance Group is regulated by the Central Bank of Ireland.