What has changed regarding pensions?

The word pension may seem complicated due to the language used and some of the rules, but in essence, it really is not! A pension is a long-term tax-efficient savings plan. However, there have been some updates to the new Personal Retirement Savings Account (PRSA) pension rules.

The main aim of these regulations has been to simplify pensions and make them more broadly available across the workforce. So what does that mean for you and your business? 

The significant changes to the PRSA were introduced by The Finance Act 2022. One change is that now the benefit in kind (BIK) for an employee, which was previously triggered by an employer contribution to a PRSA, has been removed.

How can business owners and employees benefit from these changes?

• Companies can contribute as much as they want to an employee PRSA without age-related limits, while still considering the overall standard fund threshold of €2 million. 
• PRSAs may be attractive as business owners can use a PRSA to fund their retirement; PRSAs should be a tax-efficient way to accumulate these funds.
• It allows business owners, who may not be able to afford pension contributions in certain years, to maximise their tax relief in the years they can.
• The company can contribute to both an occupational pension and a PRSA for an employee.
• This change makes PRSAs an attractive option to executive pension plans and occupational pension schemes.

For an employee or director with modest pay and/or short service, a PRSA allows for larger contributions than an Executive Pension Plan would allow.

No spreading of tax relief will apply for once-off employer PRSA contributions, regardless of size, as there is no distinction for tax relief purposes between ordinary annual contributions and special contributions paid to a PRSA.

This seems like a lot of information to take in, just like all the details around your pension-related activity.

Why not contact us below to plan for your future