Pension Changes Maximum Contribution

Commencing January 1st, 2023, substantial transformations have unfolded within the realm of Personal Retirement Savings Accounts (PRSAs), yielding significant benefits for both employers and employees. These revisions have ushered in fresh prospects for pension contributions and tax optimisation.

ALTERATIONS IN EMPLOYER CONTRIBUTIONS Preceding January 1st, 2023:

• Employer contributions to employee PRSAs hinged on age-related percentage thresholds, influencing tax relief.
• Breaching these age-related thresholds resulted in Benefit-in-Kind (BIK) implications for staff members.
• The individual was obliged to consider the overall standard fund threshold (€2 million).

Starting January 1st, 2023:

• Employers now possess the liberty to contribute to employee PRSAs without being restricted by age-based tax relief limits.
• Employer contributions are exempt from Benefit-in-Kind categorization.
• While no specific limit is imposed on employer PRSA contributions, the €2 million standard fund threshold remains applicable.

ENHANCED FLEXIBILITY The recent adjustments have ignited discussions about the ramifications of employer contributions to PRSAs, particularly concerning control. Presently, regulations do not impose an upper boundary on employer PRSA contributions, as seen in occupational pension schemes.

Salient Points for Business Owners:

• Contributions pertain exclusively to registered employees subject to PAYE Taxation at the source.
• Factors such as salary, tenure, and accrued pension benefits no longer impact employer contribution capacity.
• The Lifetime Pension Fund Limit (€2 million) and the financial capacity of the employer constitute the principal limitations.
• Unlimited employer contributions can be made to employee PRSAs devoid of age-linked constraints.
• PRSAs serve as a tax-efficient avenue for retirement financial planning.
• Entrepreneurs can optimize tax relief during prosperous fiscal years.
• Employers can channel contributions into both occupational pensions and PRSAs.
• PRSAs present an enticing alternative to executive pension schemes and occupational pension plans.
• To conclude, the removal of employer contribution restrictions to PRSAs unfurls thrilling possibilities for entrepreneurs and corporate directors. By harnessing the potential to make adaptable and tax-effective pension contributions, the path towards a more secure and prosperous retirement is illuminated.

Alan Considine 086 22 22 204