Pension changes on way for the wealthy as the Government closes a loophole

• Published date: 29 October 2024
• Publication title: Irish Times (Dublin, Ireland)

Earlier this month, the Finance Bill, which now looks set to be enacted over the coming week due to an impending general election, introduced some notable changes to pensions

While the move to increase the standard fund threshold (SFT) – the upper limit on the size on pension fund availing of tax relief that a person can have – had been flagged well in advance, the decision to tighten up the funding of PRSAs may have caught some on the hop.

So what are the changes, and how will they impact (wealthy) pension savers?

PRSAs and business owners Back in 2022, the Finance Act changed the rules so that employer contributions to a PRSA no longer triggered benefit in kind. In addition, no limit applied on the amount of employer contributions that could be made – up to the overall standard fund threshold for an individual of €2 million.

“The unrestricted funding model clearly put the PRSA at a competitive advantage compared to others,” says Fergal Roche, financial planning manager with Davy Private Clients.

Before this, once a contribution surpassed age-related limits – for example, 25 per cent of gross salary for people aged between 40 and 49 – the employee would be subject to BIK.

With employees still bound by the upper earnings limit for tax relief – €115,000 a year – the big benefit was for business owners, who were able to use the change to substantially boost...