Finance Bill 2022: unlimited employer contributions to PRSAs permitted from 2023?

willielovesall said:
It looks like this bill is due to be signed into law. Am I correct in saying that companies can now make larger contributions to an employees pension?
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To date there have been no amendments to the bill. So if President Higgins signs it in the next week or two, then yes employers will be able to make larger contributions to PRSAs from 1st January 2023 onwards.
 
The Finance Bill seems to have been signed into law https://www.oireachtas.ie/en/bills/bill/2022/101/

Does anyone know if this now means that Employer PRSA contributions will no longer be combined with Employee PRSA contributions when taking into account age related max contributions?
i.e. were there amendments which negated this welcome change. I can't figure it out
 
Employers will this year be able to pay unlimited contributions to a Personal Retirement Savings Account (PRSA) free from any Benefit in Kind charge (BIK) subject to the PRSA provider being willing to accept the contribution.

The contributions to a PRSA are not limited by salary and service or existing or retained benefits as now apply to funding under the occupational pension scheme rules.

We believe that this favourable change to PRSAs was not intended in the legislation and will most likely be amended in due course.

everlake.ie
 
Any news on this??

I have an executive pension ssap, I'm the only employee of my company, I take little in terms of wages, I have a pension property with decent rent. Should I change to Prsa and max fund my pension??
 
If, like me, you are a small business owner, here is a brief executive summary of the Finance Act as it relates to Pension Contributions in 2023:

An Employer contribution to a PRSA is no longer a Benefit in Kind (BIK) for an employee

Translation: That gets rid of an employer contribution to a PRSA being restricted by age related limits

It also means that employee contributions to PRSAs aren’t restricted by any employer contribution paid which was the case up to now – so also allows employees to contribute more and claim tax relief via a PRSA

However, the legislation does not restrict the level of BIK Free employer PRSA contributions in any way and these are not based on salary/service etc as we are used to in occupational pension schemes which are subject to Revenue maximum funding rules.

Translation: An employer can pay as much as they like into a PRSA without reference to either salary or service of the employee.

Tax relief on all employer PRSA contributions can be claimed in the accounting period in which it is paid unlike a special contribution to an occupational pension where the tax relief is spread forward over 5 years.

So now an employer can make any contribution to a PRSA they wish without limit.

Employees still need to consider the overall Standard Fund Threshold of €2 Million above which benefits are taxed at a punitive tax rate of 71%.

However, note that a PRSA can be "split" allowing a "good" fund of €2m and a "bad" fund above €2m. Note the bad fund can be deferred to age 75 and death before retirement is not a benefit crystalisation event for the purposes of applying the excess tax above the SFT.

Translation: just leave the excess to the family as a tax efficient inheritance

Therefore, not only can an employer now make an unlimited contribution to a PRSA they can also claim tax relief in the accounting period in which its paid

These rules are now hardwired in to current legislation

They apply to employees and 20% Directors. They also apply to 20% Directors of Investment Companies.

Self Employed Sole Traders or Partnerships can pay a BIK free employer PRSA contribution for an employee and this can include adult children (over 18) who can be put onto payroll.

The contribution to a Revenue approved pension, such as a PRSA, is not subject to CAT even where there is a family relationship between the parties. Therefore contributions can be made to a child's pension without impacting the CAT A exempt amounts.

Revenue's position on salary sacrifice still needs to be considered and should not be overlooked when making an employer contribution. Extra employer payments in addition to existing remuneration are allowable but an employee reducing their salary to make the payment will be caught by the salary sacrifice provisions.

An employer can contribute to an occupational scheme and a PRSA at the same time for the same employee

Retirement Planning for Gen X, Y & Z - Everlake

Regardless of your age & your feelings towards pensions & retirement planning, we implore you to at least give this guide a quick once over.
everlake.ie
 
This is an example of a problem with pension planning in Ireland, namely, the silly tinkering with the system.

These changes to PRSAs are really stupid - being excessively generous.

In time - months? years? - the penny will drop and this nonsensical measure will be closed off.

It's hard to fathom how Minister McGrath has allowed this to go through - it is open to all sorts of abuse.
 
Memories of Approved Retirement Funds back in the early 2000's when they forgot to apply income tax on withdrawals, it took a couple of years before they realised that they had a serious loss of income as wealthy people went the ARF route instead on the Annuity route
 
Hi Bedlam,

I don't recall this - by any chance do you have a link to the details? Your post implies that there was a period of time that folk could take their full ARF out tax free? Was this really a thing for a few years?
 
From my memory (which would not always be 100% reliable so don't shoot me if it's not 100% accurate) I think the issue was that there was no obligatory minimum annual withdrawal on an ARF. So there were some huge ARFs out there with no withdrawals and therefore no income tax being generated. It was a way of extracting money from a company and putting it into your own estate to be passed on when you died. After a few years Revenue closed this off by introducing the obligatory minimum withdrawal / imputed distribution rules.
 
So, what are the charges generally for 100k or 200k investment into a new Prsa?.. Any advice please. Thanks
 
Designjet said:
So, what are the charges generally for 100k or 200k investment into a new Prsa?.. Any advice please. Thanks
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I recently transferred my PRSA from one provider to another because the charges on the former were not as competitive as they were originally and compared to options available these days. I got 101% 100% (see correction post below) allocation rate and 0.67% AMC for an indexed fund. I think that the AMC may be higher if the amount involved was < €200k and/or an actively managed fund was chosen.
 
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Clubman. That pricing is great. I’ve been told that 99% is the best allocation rate you can get for a PRSA and the fees are actually set in stone with no wiggle room for providers ( neither up nor down ).

Can I ask where you got 101% allocation rate and such a low AMC.

I was setting up a new large PRSA.
Thanks
 
I'd prefer to leave it to the broker that arranged it for me to post here if they're willing to. I'll let them know. I have a long association with them which may have been a factor.
 
BTW correction. I didn't get the 101% allocation on the PRSA. That was on separate smaller PRB/PPP funds that were also transferred to avail of lower charges. The PRSA transfer allocation rate was 100%. Apologies for any confusion.
 
sunnyside said:
I’ve been told that 99% is the best allocation rate you can get for a PRSA
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That's not true. You can get 100% allocation.

sunnyside said:
and the fees are actually set in stone with no wiggle room for providers ( neither up nor down ).
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That's partially true. Every PRSA provider has a fixed range of charging options for PRSAs. Each option must be approved by the Pensions Authority. It takes time and money to get a new charging variation approved by the Pensions Authority. So unlike other pension products, where you can haggle a bit with pension companies if you have a lot of money to invest / transfer and they might shave the charges a bit for you, you won't get that with PRSAs. You pick from the providers' available PRSA charging options and that's it.

sunnyside said:
Can I ask where you got 101% allocation rate and such a low AMC.
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Where the amount involved (contribution or transfer) is >€100,000 we can arrange a PRSA with 100% allocation, 0.65% annual charge if investing in Vanguard index-tracking funds. Vanguard are very transparent about their charges. Their Portfolio Transaction Costs - the charges over and above the explicit annual management charge that some funds don't disclose readily - are around 0.02% per year depending on the fund chosen. Hence the total annual charge of 0.67% as quoted by ClubMan.

Regards,

Liam
www.FergA.com
 
Tks.
And for the avoidance of doubt. Is that the total charges.
Are there any extra charges for invest managers ?
Platform charges et etc

Or if someone gives you a €1m tomorrow for a PRSA
Will exactly €1m get invested and then there is a .67% annual charge and that’s it ?
Tks
 
sunnyside said:
And for the avoidance of doubt. Is that the total charges.
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Yes.

sunnyside said:
Are there any extra charges for invest managers ?
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No. That includes the investment manager charge.

sunnyside said:
Platform charges et etc
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It's not a platform product, but it includes the annual charge for the PRSA structure.

sunnyside said:
Or if someone gives you a €1m tomorrow for a PRSA
Will exactly €1m get invested and then there is a .67% annual charge and that’s it ?
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Yes.
 
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