Tax Tip !

This is a positive change for employees and business owners?

These changes came into effect on 1st January 2023.

1. Employees

They will now be given the same tax treatment as scheme members of occupational pension, in relation to any employer contributions to their pension scheme. Previously on the employers contribution paid into the PRSA, that employer contribution used up part of the employee’s age-related limits. Employee contributions are still subject to age-related contribution limits and the Earnings Cap which is currently €115,000.

2. Employers

There is no maximum funding calculation used to determine the ability of the employer to contribute - this would exist within occupational pension schemes. The only limit here is the Lifetime Pension Fund Limit - currently €2M.

For full details on how this will impact you, you should talk to your qualified financial advisor for specific advice that can be tailored for you and your circumstances.

As a Company Owner, you should consider the many benefits of pensions which include:

Tax advantages: Company owners may be able to take advantage of tax benefits by contributing to a pension plan. Depending on the pension plan and the jurisdiction, contributions may be tax-deductible, and investment growth may be tax-free or tax-deferred until retirement.

Retirement income: Pensions can provide a regular income in retirement, helping to ensure a secure financial future. Company owners may also be able to structure their pension income to minimize tax liability.

Employee retention: Offering a pension plan can be a valuable tool for attracting and retaining talented employees. Company owners may also be able to contribute to their employees’ pension plans as part of their compensation package.

Succession planning: Pension plans can be used as part of a company’s succession planning strategy, helping to ensure that the business can be transferred to the next generation or sold to new owners.

Asset protection: Pension plans can offer asset protection by keeping retirement savings in a separate account that is generally protected from creditors in the event of bankruptcy or other financial difficulties.

Social responsibility: Offering a pension plan can demonstrate a company’s commitment to social responsibility and the financial security of its employees.

Don’t forget to contact your tax advisor, QFA or revenue if you need clarification on any specific tax issues.