Legislative changes on Employer Contributions to PRSA’s

The Finance Act 2022 (enacted 15 December 2022) removed the benefit‑in‑kind (BIK) charge on employer contributions to a PRSA with effect from 1 January 2023. From 1 January 2025, Finance Act 2024 introduced a new employer limit for PRSA contributions: an employer can contribute up to 100% of the employee’s emoluments for that tax year. Any excess is a BIK for the employee and is not deductible for the employer. Employers check compliance at 31 December each year (and on leavers).

Impact for employees

Employer PRSA contributions are not BIK (within the employer limit) and do not use up your personal, age‑related tax relief limits.
Your own PRSA contributions still follow the age‑related limits and the €115,000 earnings cap.

Impact for business owners

There is now a cap: employer PRSA contributions are limited to 100% of the employee’s emoluments for the calendar year. Excess is BIK (Income Tax, USC, PRSI) and not deductible for the employer.
Applies to employees and directors.
Contributions should be planned with year‑end and leaver scenarios in mind (employer limit is based on actual emoluments for that employment in the year).

20% directors of investment companies

A 20% director of a company treated as an investment company still cannot be a member of an approved occupational pension scheme for that employment. Funding via a PRSA remains available (subject to the employer limit above).

PRSAs vs occupational pensions — at a glance

Employer contributions

Occupational (Retail Master Trust): Subject to maximum funding rules and Revenue guidance on ordinary annual vs special contributions (relief may need to be spread).
PRSA: Employer limit = 100% of emoluments (calendar‑year basis). Excess = BIK and not deductible. Not subject to occupational max‑funding rules.

Trustee

Occupational: Yes (e.g., master trustee).
PRSA: Not trust‑based.

Access to benefits

Occupational: From 50 if retiring from that employment (subject to scheme rules/consent); otherwise scheme NRA (min 60).
PRSA: From 60 as standard; from 50 where retiring from an employment linked to the PRSA (and no longer economically active for that job).

Death benefit (before retirement)

Occupational: Lump sum up to 4 × final remuneration (plus refund of member contributions); balance to ARF/annuity for dependants.
PRSA: Full value is payable to the estate if death occurs before benefits are taken (post‑retirement tax follows ARF/vested‑PRSA rules).

Transfers

Occupational: Overseas transfers must meet strict conditions; tax‑neutrality depends on the rules.
PRSA: Transfers to another PRSA or to an approved Irish scheme are permitted. Overseas PRSA transfers fall under the Overseas Transfer Regulations and may be taxable—they are not listed among Revenue’s non‑taxable PRSA payments.

Flexibility

Occupational: Benefits generally crystallise together.
PRSA: Possible to split across multiple PRSAs to phase drawdown.

Standard Fund Threshold (SFT) and lump sums (context)

The SFT remains €2.0m in 2025. Government has announced a phased increase 2026–2029 to €2.8m (and indexing thereafter), subject to legislation.
Retirement lump‑sum limits are unchanged: lifetime €200,000 tax‑free; the next €300,000 taxed at the standard rate; amounts over €500,000 taxed under PAYE at the marginal rate.

Salary sacrifice

As with occupational schemes, salary sacrifice arrangements must follow Revenue rules.

Key takeaways

From 2025, employer PRSA contributions are capped at 100% of emoluments; plan timing and leavers carefully.
BIK applies on any excess and the excess is not deductible.
For investment company 20% directors, PRSA remains an available route when an occupational scheme is not.

Book your consultation

As always, the best route depends on your structure, cash‑flow, and retirement goals. We’re happy to advise.

Talk to us: Email [email protected] or call +353 1 296 6120.