Possible changes to pension limits for Ltd company owners in budget?

[poorrelative]

According to 'askaboutwealth' newsletter

1. This huge tax change may be about to disappear​ ​

In January 2023, Irish Revenue made a big change to how much you could fund your private pension from a company. Up until then there was a limit on how much you could fund each year based on your salary and age.​

The current rules means there is no limit up until the €2M threshold, so if you had €1M sitting in your company accounts, you could transfer it into your pension fund tax free, paying effectively no corporation or income tax.​

However we’ve heard on good authority that this is under review and is likely to disappear in the upcoming budget. So if you’re a business owner with cash assets it’s time to act now as the window could be closing.​

 

[Okokokoknic]

No salary for the rest of the year so!

 

[Bill90.]

I've heard this too.

Any idea what changes they will impose?.

It's absolutely sickening.

 

[Steven Barrett]

I also have it on good authority that the Revenue were well aware of the removal of annual pension funding checks well in advance of its introduction and were fine with it.

Any changes will simply be to impose the very generous company pension funding provision that is already in place for Master Trusts to company paid PRSAs. Amounts that most people don't exceed anyway. So for most people, it will not have any impact.

This became an issue out of nowhere a few months ago. I really don't see what the fuss it and debunked their argument.

There is no "massive loophole" in pensions - Bluewater Financial Planning

An article appeared the The Irish Times about a “massive loophole” in pensions. This took me by surprise. Was there something that I had missed? I’ve been working in pensions for 25 years and I like to think that I stay up to date on changes in legislation. Have I been giving my clients the […]

www.bluewaterfp.ie

 

[Bill90.]

I also have it on good authority that the Revenue were well aware of the removal of annual pension funding checks well in advance of its introduction and were fine with it.

Any changes will simply be to impose the very generous company pension funding provision that is already in place for Master Trusts to company paid PRSAs. Amounts that most people don't exceed anyway. So for most people, it will not have any impact.

This became an issue out of nowhere a few months ago. I really don't see what the fuss it and debunked their argument.

There is no "massive loophole" in pensions - Bluewater Financial Planning

An article appeared the The Irish Times about a “massive loophole” in pensions. This took me by surprise. Was there something that I had missed? I’ve been working in pensions for 25 years and I like to think that I stay up to date on changes in legislation. Have I been giving my clients the […]

www.bluewaterfp.ie

Hi Stephen

So you think any changes shouldn't affect my idea below?.

Say I have 45k of self employed income which is deemed unearned income so doesn't qualify for pension tax relief.

Separately
I have a taxi business which I should make 30k a year profits.

I wanted to set the taxi up as a limited company and put 90% of the profits into my prsa (vanguard world etf). Compounding for the next 20 years would set me up nicely.

I really hope I'll still be able to do this.

 

[Steven Barrett]

Hi Stephen

So you think any changes shouldn't affect my idea below?.

Say I have 45k of self employed income which is deemed unearned income so doesn't qualify for pension tax relief.

Separately
I have a taxi business which I should make 30k a year profits.

I wanted to set the taxi up as a limited company and put 90% of the profits into my prsa (vanguard world etf). Compounding for the next 20 years would set me up nicely.

I really hope I'll still be able to do this.

Company pension funding rules are based on income, years service, age and other pension benefits, so yes, it would impact on your plan.

I haven't heard of ask about wealth before, but Paul Overy is well known in the industry. Ask about wealth is an unregulated advisory firm and seems very much to try to generate sales (I suspect they receive a referral fee for sending pension business to regulated businesses).

I honestly do not know if there will be any changes to PRSA funding in the future but there is no other chatter in the industry outside brokerages who are using it as a sales tool to generate sales. Life companies have been warned by the Revenue not to allow frivolous cases through (putting large amounts of money into a pension for an 18 year old child who earns €4,000 in their summer job with a parent but leaves goes back to college with €1m in their PRSA). Seeing as the Revenue knew about and ok'd the changes before they came in and there hasn't been reports of abuse of the loosening of the funding checks, why would there be changes? Because there was an article in The Irish Times a few months ago?

 

[Bill90.]

Company pension funding rules are based on income, years service, age and other pension benefits, so yes, it would impact on your plan.

I haven't heard of ask about wealth before, but Paul Overy is well known in the industry. Ask about wealth is an unregulated advisory firm and seems very much to try to generate sales (I suspect they receive a referral fee for sending pension business to regulated businesses).

I honestly do not know if there will be any changes to PRSA funding in the future but there is no other chatter in the industry outside brokerages who are using it as a sales tool to generate sales. Life companies have been warned by the Revenue not to allow frivolous cases through (putting large amounts of money into a pension for an 18 year old child who earns €4,000 in their summer job with a parent but leaves goes back to college with €1m in their PRSA). Seeing as the Revenue knew about and ok'd the changes before they came in and there hasn't been reports of abuse of the loosening of the funding checks, why would there be changes? Because there was an article in The Irish Times a few months ago?

Yes I hope you're correct. I'll be fairly anxious watching the budget this year. Fingers crossed. Thanks for the reply.

 

[Bill90.]

Company pension funding rules are based on income, years service, age and other pension benefits, so yes, it would impact on your plan.

I haven't heard of ask about wealth before, but Paul Overy is well known in the industry. Ask about wealth is an unregulated advisory firm and seems very much to try to generate sales (I suspect they receive a referral fee for sending pension business to regulated businesses).

I honestly do not know if there will be any changes to PRSA funding in the future but there is no other chatter in the industry outside brokerages who are using it as a sales tool to generate sales. Life companies have been warned by the Revenue not to allow frivolous cases through (putting large amounts of money into a pension for an 18 year old child who earns €4,000 in their summer job with a parent but leaves goes back to college with €1m in their PRSA). Seeing as the Revenue knew about and ok'd the changes before they came in and there hasn't been reports of abuse of the loosening of the funding checks, why would there be changes? Because there was an article in The Irish Times a few months ago?

Also if you don't mind me asking.

Say they did change the rules and I paid CT on profits and invested the rest in a corporate investment account instead for 10/15 years and then cashed out investments paying 25% on the profit leaving maybe 3 4 5 hundred k in the company, can I avail of entrepreneurial relief or retirement relief if I was to ever wind down the company?.

Just trying to educate myself on the mechanics of a limited company and how to be as efficient as possible with it.

 

[Steven Barrett]

Also if you don't mind me asking.

Say they did change the rules and I paid CT on profits and invested the rest in a corporate investment account instead for 10/15 years and then cashed out investments paying 25% on the profit leaving maybe 3 4 5 hundred k in the company, can I avail of entrepreneurial relief or retirement relief if I was to ever wind down the company?.

Just trying to educate myself on the mechanics of a limited company and how to be as efficient as possible with it.

I'm not qualified to say on that. You need to talk to an accountant about that.