Big Changes to PRSAs and Pensions: What You Need to Know from the Latest Finance Bill

The Finance Bill, published on the 11th of October, brings some important changes to how pensions and Personal Retirement Savings Accounts (PRSAs) work in Ireland. These updates are going to impact both employers and employees, especially company directors. Below is a breakdown of the key changes that will affect PRSAs, employer contributions, and the introduction of Auto Enrolment. 

1. Employer Contributions to PRSAs Now Limited to 100% of Salary 

The big news is that employers can only contribute up to 100% of an employee’s or director’s salary to a PRSA. 

So, if someone earns €50,000 in 2025, their employer can contribute up to €50,000 to their PRSA for that year—no more. This sets clear boundaries for contributions and keeps everything tied to the salary level. 

2. Excess Contributions Count as Benefit in Kind (BIK)

If the employer goes over that limit, the extra amount will be treated as a Benefit in Kind (BIK).  This means the extra contribution will be taxed as income for the employee or director. 

For example, if the employer contributes €60,000 to a PRSA for someone earning €50,000, the additional €10,000 will be taxed as part of the employee’s income. 

3. Tax Deductions for Employers 

Employers can still get a tax deduction on their PRSA contributions, but only up to the 100% salary cap. So, if they contribute more than the salary, the company won’t be able to claim a tax break on the extra amount, and the employee will face a tax bill for that over-contribution. 

4. Changes to the Standard Fund Threshold (SFT) 

The Bill also discusses changes to the Standard Fund Threshold (SFT), the limit on how much you can save in your pension without facing extra tax penalties. This mostly affects higher earners or people with large pension funds. 

We don’t have all the details yet, but if you’re nearing the SFT, it’s a good idea to keep an eye on this and plan ahead to avoid potential tax hits. 

5. Auto Enrolment Is Coming 

Another big change in the Finance Bill is Auto Enrolment, which means employers will soon be required to automatically enroll eligible employees in a pension scheme. Both the employer and employee will need to contribute to the pension. 

This is part of a broader effort to increase pension coverage in Ireland, especially for people who aren’t currently enrolled in any pension scheme. While the details are still being worked out, this is a big shift in how retirement savings will be managed moving forward. 

When Will These Changes Take Effect? 

These changes could come into effect either when the Finance Bill is signed into law or from 1 January 2025. There’s no fixed date just yet, so stay tuned for updates. 

What Should You Do Next? 

• Employers: Make sure that your pension contributions are in line with the new 100% salary cap. Contributing too much could result in unexpected taxes for both your company and your employees. 

• Employees and Directors: Be aware of how these new rules may impact your retirement savings and plan ahead to avoid getting hit with taxes if contributions go over the new limits. 

• High Earners: If your pension fund is close to the SFT, now’s a good time to seek financial advice to avoid extra tax penalties. 

• Everyone: Stay tuned for more details on Auto Enrolment—this will change how pensions work for a lot of people in Ireland. 

This Finance Bill introduces some significant updates to pensions and PRSAs. It’s important for both employers and employees to understand these changes, stay compliant, and plan ahead to avoid any surprises when the new rules come into effect. Schedule a Consultation with our experts to discuss how these changes may affect your organisation.

Source: Gov.ie