# Why should my Employer contribute to my PRSA



## Happy Girl (22 Mar 2007)

I am in the process of taking out a PRSA and I have asked my employer if the company would be in a position to contribute to it. He has asked me to put together a proposal outlining why the company should contribute to this for me so that he can argue my case to the Board of Directors. Any ideas/suggestions.


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## ClubMan (22 Mar 2007)

Because you're worth it?

Might be worth mentioning that any contributions that they make would be exempt from employer _PRSI _of 10.75% so even if they paid part of your salary as an employer pension instead then they could top it up by 10.75% at no cost to them and at a small benefit to you.


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## Happy Girl (22 Mar 2007)

ClubMan said:


> Because you're worth it?
> 
> Might be worth mentioning that any contributions that they make would be exempt from employer _PRSI _of 10.75% so even if they paid part of your salary as an employer pension instead then they could top it up by 10.75% at no cost to them and at a small benefit to you.


 
Sorry Clubman. Don't understand this. Can you explain in more detail please.


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## ClubMan (22 Mar 2007)

Say you are paid €40K p.a. This costs the employer €40K @ 10.75% = €4,300 in employer _PRSI_. If instead they restructured your remuneration package so that they paid you €35K and made a €5K employer contribution to your pension then their employer _PRSI _bill would be €3,762.5. They could top the employer pension contribution with their employer _PRSI _"saving" i.e. €4,300 - €3,762.50 = €537.50 making a total contribution of €5,537.50 at no additional cost to them. Just a small bonus that might help in some situations. The same employer _PRSI _saving should also apply to your own personal contributions if I recall correctly. I convinced an employer to do this a few years ago in order to top up the pension contributions for me and my colleagues. There may be other issues (e.g. pension tax relief funding limits) that I am ignoring here for simplicity.


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## F. Kruger (22 Mar 2007)

OR

If the Employer paid €25 per month and the Employee paid €200 per month, the net cost to the employer would be  €0.37 per month.

Assumption

€25 - €3.13(tax relief @ 12.5%) - PRSI Relief €21.50 (10.75% of €200) = €0.37.


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## ClubMan (22 Mar 2007)

F. Kruger said:


> €25 - €3.13(tax relief @ 12.5%) - PRSI Relief €21.50 (10.75% of €200) = €0.37.


Sorry ... can you explain this in more detail please? 

Where does 12.5% come from and why is the _PRSI _relief being subtracted from the tax relief. Maybe I'm just being dumb but I don't understand the formula...


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## Guest126 (22 Mar 2007)

This is flawed - the employee will save PRSI on the employee contribution (of €200)...but the employer will not!

I presume the 12.5% is the rate of corporation tax, but you could apply that logic to salary payments also?


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## ClubMan (22 Mar 2007)

CapitalCCC said:


> This is flawed - the employee will save PRSI on the employee contribution (of €200)...but the employer will not!


OK - my mistake so. Sorry. I think what happened in my case a few years back is that the employer was matching employee contributions up to some limit (5-6% maybe) and I mentioned to them that they could supplement this with their employer _PRSI _saving at no extra cost to the company so they did this.


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## Guest126 (22 Mar 2007)

Club - I agree with you on that point - I was disagreeing with the F Kruger calc but I am not sure whether or not I am right to disagree with him - I certainly don't agree with the Corp Tax reference!


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## ClubMan (22 Mar 2007)

So just to clarify - I was mistaken earlier when I suggested that the employer might save employer _PRSI _on any pension contributions made by the employee?


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## Guest126 (22 Mar 2007)

I don't know - I would not have thought that the employer should benefit from any such decision made by an employee - the salary is the salary and PRSI should be paid on the salary I would have thought...


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## upport (22 Mar 2007)

Employer saves prsi at 10.75% of employee prsa contribution as long as the prsa is deducted from employee's salary.So 'ee contributes 100, 'er does not have to pay prsi on 100,thereby saving 10.75 so 'er could contribute 10.75 to prsa at no additional cost.


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## ClubMan (22 Mar 2007)

Thanks - _upport_. I'll do another U turn and declare that I was correct at the start so!  But seriously - informing an employer that they could redirect such employer _PRSI _"savings" into your pension at no extra cost to them can be useful.


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## Happy Girl (23 Mar 2007)

Ok folks tks for that. Can anyone provide a web page where I can confirm that employers will benefit from MY contributions to the PRSA. Seems v unfair.

Any other suggestions to encourage them to contribute to my PRSA.


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## ClubMan (23 Mar 2007)

Happy Girl said:


> Ok folks tks for that. Can anyone provide a web page where I can confirm that employers will benefit from MY contributions to the PRSA. Seems v unfair.


Why? You are getting tax (20% or 41%) and _PRSI _(4%)/health levy (2%) relief on such contributions. They are just getting employer _PRSI _(10.75%) relief on them. And if you can get them to put this "saving" into your fund then you are benefiting third time over.


> Any other suggestions to encourage them to contribute to my PRSA.


 Explain to them in detail why exactly your contribution to the company's bottom line merits an increase in remuneration in the form of pension contributions and how such a benefit would be a good retention mechanism.


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## Happy Girl (23 Mar 2007)

_"Why? You are getting tax (20% or 41%) and PRSI (4%)/health levy (2%) relief on such contributions. They are just getting employer PRSI (10.75%) relief on them. And if you can get them to put this "saving" into your fund then you are benefiting third time over"._

This is exactly what I am looking for exact confirmation on. Basically if I just contribute say 100 pw to my PRSA and my employer contributes nothing then do they get the saving with regard to Employer's PRSI. I am getting conflicting view on this. Basically if I net 500 pw and contribute 100 to prsa pw then my taxable salary will be 400. Does it work the same for my employer. Basically will they only have to pay 10.75% on the 400.


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## ClubMan (23 Mar 2007)

Happy Girl said:


> I am getting conflicting view on this.


You mean becuse of my flip flopping above? If so then I am pretty sure (again) that the employer avoids employer _PRSI _on the employee's contribution if the contributions are made via payroll (i.e. before any statutory deductions are made). See this thread.


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## Happy Girl (23 Mar 2007)

Clubman how could you even think like that!!!! The attached is a quote from “one stop PRSA” [broken link removed] and the following extract has left me confused (which is not too difficult to do at times I might add)
“*If you contribute to your employees’ PRSAs, you are not liable to Employer’s PRSI on the contributions *you *make, whereas you are normally liable to Employer’s PRSI on any salary increases to your employees”.*
I take from this that they do not pay PRSI only on the contribution (if any) they make and not on my contributions. So therefore there would be no PRSI saving for them if I am the only one making contributions. Am I reading this wrong?


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## ClubMan (23 Mar 2007)

Happy Girl said:


> I take from this that they do not pay PRSI only on the contribution (if any) they make and not on my contributions.


The extract does not explicitly state that and I still suspect that the employer does not pay employer _PRSI _on any employee pension contributions made via payroll. Perhaps somebody with access to a payroll software package could check?


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## Guest126 (23 Mar 2007)

Good News!!

I just checked my pay slip (today is pay day and all!) - my Employer has not paid ER PRSI on the part of my salary that I put in to the pension plan.

Club - you are correct.

Happy Girl - the ER does not pay ER PRSI on that part of your salary that you put into pension.

Have a nice weekend


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## ClubMan (23 Mar 2007)

Thanks _CapitalCCC_. I never doubted myself. Except maybe once above and once in that other thread and ...


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## Happy Girl (23 Mar 2007)

Tks a million for clarification. Much appreciated.
Will put that forward as part of my plea! together with the fact that I am a L’Oreal Girl - basically “because I’m worth it”. Well God loves a trier!! Will keep you posted how things go.


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## Happy Girl (19 Apr 2007)

Back to this again folks. Just rang revenue and any contributions made by my employer will be seen as Benefit in Kind and I will be the one paying the PRSI and PAYE contributions on this. I can fully understand why the oridinary "joe soap" doesn't bother contributing to pension.


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## ClubMan (19 Apr 2007)

Happy Girl said:


> Back to this again folks. Just rang revenue and any contributions made by my employer will be seen as Benefit in Kind and I will be the one paying the PRSI and PAYE contributions on this. I can fully understand why the oridinary "joe soap" doesn't bother contributing to pension.


This does not sound correct. _Revenue _are not always right.


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## Sherman (19 Apr 2007)

As far as I understand employer contributions are indeed deemed to be BIK, however the Revenue have adopted a practice of ignoring the BIK implications of such contributions, provided the global amount of the contributions is within the allowable age-related percentage.


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## Guest126 (19 Apr 2007)

This same point is running simultaneously in another thread.

Yes it would be a BIK to a personal pension but not to a PRSA.

Even then, with the Personal Pension, the policyholder could claim relief for those contributions as if they were paid by the policyholder him/her self...so the overall impact is tax relief.


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## KalEl (19 Apr 2007)

Happy Girl said:


> Back to this again folks. Just rang revenue and any contributions made by my employer will be seen as Benefit in Kind and I will be the one paying the PRSI and PAYE contributions on this. I can fully understand why the oridinary "joe soap" doesn't bother contributing to pension.


 
Doeas anyone know for sure...I thought an employer contributing the 10.75% as a gesture of goodwill was perfectly fine (and cost neutral)?


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## Sherpa (19 Apr 2007)

I know I'm taking this thread a bit off-topic but....

What all this confusion about tax relief, PRSI relief etc. says to me is that it's high time the government scrapped the existing (confusing) tax relief regime and introduced a simple and transparent alternative.  In my view they should opt for a "SSIA-style" approach - whatever you contribute to your pension gets a matching contribution from the government (e.g. €1 for every €2 you put in).  

As the OP says, the existing system is just too complicated and off-putting for a lot of people.


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## KalEl (19 Apr 2007)

Sherpa said:


> I know I'm taking this thread a bit off-topic but....
> 
> What all this confusion about tax relief, PRSI relief etc. says to me is that it's high time the government scrapped the existing (confusing) tax relief regime and introduced a simple and transparent alternative. In my view they should opt for a "SSIA-style" approach - whatever you contribute to your pension gets a matching contribution from the government (e.g. €1 for every €2 you put in).
> 
> As the OP says, the existing system is just too complicated and off-putting for a lot of people.


 
Good call...and give everyone the equivalent of tax relief at the higher rate. It's pretty unfair that the less well off in society don't get the same deal. The success of the SSIA's was based on the transparency of the deal...it was a no-brainer. Pensions are still pretty mysterious and it can be difficult to see the immediate benefits for some people.


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## ClubMan (19 Apr 2007)

Sherpa said:


> As the OP says, the existing system is just too complicated and off-putting for a lot of people.


Totally agree. The various options/permutations and technicalities are far too complex. And the administrative cost for all parties (employees, employers, _Revenue_, underwriter etc.) could surely be reduced by a simpler system.



KalEl said:


> It's pretty unfair that the less well off in society don't get the same deal.


But they pay less tax in the first place!?


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## KalEl (19 Apr 2007)

ClubMan said:


> But they pay less tax in the first place!?


 
They do...but a system where the government topped up your contributions rather than not charging you tax on your contributions would make it possible.


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## ClubMan (19 Apr 2007)

KalEl said:


> Doeas anyone know for sure...I thought an employer contributing the 10.75% as a gesture of goodwill was perfectly fine (and cost neutral)?


That's certainly how it worked out for me in the past and I presume that it was not a mistake. Employer 10.75% _PRSI _"saving" on my contributions put into my (employer scheme) _PRSA_.


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## KalEl (19 Apr 2007)

ClubMan said:


> That's certainly how it worked out for me in the past and I presume that it was not a mistake. Employer 10.75% _PRSI _"saving" on my contributions put into my (employer scheme) _PRSA_.


 
Same for me...we do it for our employees also. There's no way it could be slipping by all our radars (and those of our accountants!)


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## ClubMan (19 Apr 2007)

KalEl said:


> Same for me...we do it for our employees also. There's no way it could be slipping by all our radars (and those of our accountants!)


I had to explain it to the accountant in my last job just as I had to explain the difference between weekly and monthly _PRSI _exemption amounts (€127 versus €551). I had to explain to the accountants in the current job that they should not be deducting _BIK _income tax and _PRSI _at source on _ESPP _nominal income (Employer deduction of BIK tax/PRSI on share options). I hope I was right!


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## Happy Girl (20 Apr 2007)

CapitalCCC said:


> Yes it would be a BIK to a personal pension but not to a PRSA.


 
Thanks folks for all the discussion but am still as confused. Is there any site I can be directed to that can either confirm or refute the above. Revenue maintains employers contribution to my PRSA would be a BIK but she was a little hesitant and unsure.


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## Guest126 (20 Apr 2007)

But even if it was a BIK then it should be trated as if you made the contribution personally and accordingly the tax-relief should offset the BIK!


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## Happy Girl (25 Apr 2007)

Back to this again. As contributing to an employee's PRSA is a totally new thing with my employer the Boss has asked me to provide a summary of what other companies are contributing to their employees pensions as a guideline. 

While I realise this is a private issue for people, I had hoped, given the anonymity of this page, that some of you out there might provide me with the following (a) how much (either % or amount) your employer is contributing to your pension and (b) company name (I would need this to verify to the Directors that I am not just pulling figures out of hats).


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## ClubMan (25 Apr 2007)

In the past I have worked for employers who matched/contributed 0%, 3%, 5% and 6%. It varies a lot. My current employer matches/contributes 3%.


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## ubiquitous (25 Apr 2007)

Happy Girl said:


> some of you out there might provide me with the following (a) how much (either % or amount) your employer is contributing to your pension and (b) company name (I would need this to verify to the Directors that I am not just pulling figures out of hats).



I'm not sure if it is appropriate for you to ask other AAM users to publicly divulge these details to you. If anyone is naive enough to do so, they could well end up getting themselves into trouble with their employer, for example if their pay and conditions are subject to a confidentiality clause, or if they have breached their employer's internet usage policies by logging on to AAM at work.

Go to the likes of IBEC or ISME for such information if you really need it.


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## ClubMan (25 Apr 2007)

ubiquitous said:


> for example if their pay and conditions are subject to a confidentiality clause


Do some people really have confidentiality clauses covering this sort of stuff? My contract certainly does not and confidentiality clauses preventing people from telling others what they earn or what their other benefits are would seem very restrictive. 


> or if they have breached their employer's internet usage policies by logging on to AAM at work.


But that would surely apply to *any *post on _AAM _so why post that here specifically?


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## Happy Girl (25 Apr 2007)

ubiquitous said:


> I'm not sure if it is appropriate for you to ask other AAM users to publicly divulge these details to you. If anyone is naive enough to do so, they could well end up getting themselves into trouble with their employer, for example if their pay and conditions are subject to a confidentiality clause, or if they have breached their employer's internet usage policies by logging on to AAM at work.
> Go to the likes of IBEC or ISME for such information if you really need it.


 
Not looking for PPS numbers!!! Just want some guidelines as to what is a reasonable % to ask for. Even if somebody does not want to "divulge" via a thread they always have the option to e-mail me privately. I would much appreciate any guidance anybody can provide.


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## ClubMan (25 Apr 2007)

On the other hand if you need to back up your figures with your employer then they will presumably need more than just a printout of a thread from a message board containing posts from (mostly) anonymous/pseudonymous posters?


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## Guest126 (26 Apr 2007)

For a company that operates an occupational pension scheme for staff - 5% would be an "average" employer contribution.

If you were to sample all occupational pension schemes in Ireland - the median company contribution would be about 5%.

Of course, about 50% of employers do not opreate an occupational pension scheme at all - so on this basis your employer may argue for a lower employer contribution!!


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## ubiquitous (26 Apr 2007)

Happy Girl said:


> Even if somebody does not want to "divulge" via a thread they always have the option to e-mail me privately.



How safe is that? Nobody knows who you are. And you are going to present this information to your employer...


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## Happy Girl (26 Apr 2007)

ubiquitous said:


> How safe is that? Nobody knows who you are. And you are going to present this information to your employer...


 
I just can't seem to say the right thing here!!!! Basically if anybody can provide any guidelines similar to CapitalCCC as above I would appreciate it very much. Anybody who does not want to provide information that is fine too!!


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## ClubMan (26 Apr 2007)

Happy Girl said:


> (I would need this to verify to the Directors that I am not just pulling figures out of hats).


How are you going to do this? I could _PM _you and tell you that I work for _McDonalds _and they contribute 50% of salary to my pension!


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## aidan119 (26 Apr 2007)

This is a simple question needing a simple answer, not a mafia enquiry.



See this survey from 2002. Bit out of date but fair to assume that apart from switching DB to DC schemes, the employer contributions would be no worse and most likely improved since then.



http://www.iapf.ie/Infosource/Surveys/BenefitsSurvey/PublicationFileForDownload,1232,en.pdf


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## Happy Girl (26 Apr 2007)

aidan119 said:


> This is a simple question needing a simple answer, not a mafia enquiry.


 
Thank you Aidan. Logic at last. Was beginning to regret even asking the question in the first place.


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## Sherpa (26 Apr 2007)

This presentation might be helpful also:

[broken link removed]

Provides a useful summary of pension coverage/benefits.


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## Happy Girl (4 Jun 2007)

upport said:


> Employer saves prsi at 10.75% of employee prsa contribution as long as the prsa is deducted from employee's salary.So 'ee contributes 100, 'er does not have to pay prsi on 100,thereby saving 10.75 so 'er could contribute 10.75 to prsa at no additional cost.


 
I have trawled through Revenue.ie and cannot find confirmation of the above. The only reference made is "...Contributions paid into a PRSA will benefit from tax relief at an individuals marginal tax rate. There will also be relief from PRSI and the health levy for employees...". This implies to me that ONLY employees benefit from PRSI/health levy on contributions made by themselves and NOT employers. Can anybody direct me to a reliable official source which answers this questions.


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## ClubMan (4 Jun 2007)

That point is true but the authoritative word on it is probably buried somewhere in the tax briefings or _TCAs _themselves so it may be difficult to root it out. In a previous job I was aware of this point, suggested to my employer that they might redirect any employer _PRSI _"saving" into my pension as a bonus at no real cost to themselves, they checked it with their accountant and once it was all OK they went with it.


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