Dave Vanian
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Yes it is and yes you can. Your personal contribution to both combined should stay below your age-related limits for tax relief, e.g. 25% of salary while in your 40s etc.
Finance Bill 2022: unlimited employer contributions to PRSAs permitted from 2023?
- Thread starter LDFerguson
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Yes it is and yes you can. Your personal contribution to both combined should stay below your age-related limits for tax relief, e.g. 25% of salary while in your 40s etc.
https://rte.ie/news/business/2025/0106/1489319-revenue-reviews-glaring-pension-loophole
Not quite sure how it is considered 'suspected misuse', the outcome of the wording in the Bill was glaringly obvious and called out on this forum long before it became law.
Not quite sure how it is considered 'suspected misuse', the outcome of the wording in the Bill was glaringly obvious and called out on this forum long before it became law.
LDFerguson
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I'm possibly being pedantic here but I also think that the use of the term "loophole" in this context is a misnomer. To me a loophole is where someone discovers a clever application of a rule or unearths a sub-paragraph of a rule that allows them to sidestep the rule, or gain some unexpected advantage. In this case, the rule itself was that employers could put unlimited pension contributions into an employee's PRSA. This was the rule and plenty of companies availed of it. No loophole required.
Yeah, seems a bit odd but, then again, I guess that Revenue anti-avoidance measures can be quite wide ranging so maybe at least some of the exploitation of this "loophole" may fall foul of same...?
Steven Barrett
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2 years it lasted! Directors, some advisors and some providers just couldn't help themselves.
The Revenue warned everyone from the beginning that it had to be bone fides employment. The advisor shouldn't have allowed it but failing that, the provider should have refused to take the business too.
On large amounts going in, that has always been allowed. If I do a Revenue funding check for a 55 year old with no pension he can make an annual contribution of €687,500 to age 60. Or he can make a once off contribution of over €2.2m for back service and €132,000 a year going forward. The difference between the €2.2m and the PRSA situation is the company would have to claim tax relief over a number of a years and not in the year it is paid.
Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
The Revenue warned everyone from the beginning that it had to be bone fides employment. The advisor shouldn't have allowed it but failing that, the provider should have refused to take the business too.
On large amounts going in, that has always been allowed. If I do a Revenue funding check for a 55 year old with no pension he can make an annual contribution of €687,500 to age 60. Or he can make a once off contribution of over €2.2m for back service and €132,000 a year going forward. The difference between the €2.2m and the PRSA situation is the company would have to claim tax relief over a number of a years and not in the year it is paid.
Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
Dr Strangelove
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I heard that the scion of a major Irish business availed of an eight-figure top-up last year.
I can well believe it. Revenue are also very reticent about ever admitting they made a mistake.
That being the case then that is probably the kicker when it comes to their investigations into potential abuse of the "loophole"?
If it was in relation to a bona fide employment then presumably that is probably completely above board?
Gordon Gekko
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Why would he or she accept a €10m+ contribution when it’s going to be subject to Chargeable Excess Tax?
Unless the person was terminally ill.
Dr Strangelove
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It is.
That struck me as well. Perhaps there is an estate planning angle. Or perhaps it was just pub talk.
Steven Barrett
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Revenue knew all about it and consulted with the life companies before it was announced in the Budget...and after, hence the warnings about bone fides occupations.
Pension contributions in the hundreds of thousands is not unusual in the cases of company directors. Many are way behind in pension funding as they kept their salary and pension contributions low while they built the business. The large contributions are made towards the end of their working life when there is excess cash in the company.
Media headlines seem to imply that something underhand was happening.
If the law allowed unlimited contributions, and business owners availed of that with legally obtained funds, then whats the problem ?
Surely its a good thing for anyone to minimize tax bills wherever legally allowed?
If the law allowed unlimited contributions, and business owners availed of that with legally obtained funds, then whats the problem ?
Surely its a good thing for anyone to minimize tax bills wherever legally allowed?
This? Doing it for an employment that wasn't bona fide which was, perhaps, artificially created solely or mainly to avail of this "loophole" - something which might well fall foul of anti-avoidance regulations?
Did anybody say that it was?