Let’s Talk Pensions with Brian Gaffney QFA RPA BA
You may not be aware but there has been changes to Pensions provision in the Finance Act 2022 which came into e ect 1st January 2023 and these are in relation to Personal Retirement Savings Accounts (PRSAs) and I will outline these changes here.
PRSA contribution changes
Employer PRSA contributions are exempted from BIK
Maximum employee PRSA contributions continue to be based on age related 15% to 40% of salary limits – however, this employee contribution limit will no longer have to take employer PRSA contributions into account.
The new PRSA employer contribution rules as published do not have Revenue Maximum annual or single contribution restrictions.
This means that PRSA employer annual or single contributions are in e ect only limited by the €2 million Standard Fund Threshold
on maximum tax relieved pension funds from all sources at retirement.
Finance Act 2022
There were three main changes relating to pensions:
• PRSA – no Benefit in Kind (BIK) charge on employer contributions to a PRSA
• Lump Sums drawdown from foreign pension schemes now included in your lifetime allowance this will not affect most people here but we can discuss with anyone who may fall into this area.
• PEPP – Provisions made for tax relief on contributions and taxation of benefits this does not affect people here yet.
PRSA
The changes that have been presented by the Finance Act have now brought the PRSA to the fore front of pension planning. The PRSA is the pension product of the future. While historically it was viewed as restrictive, it is a very flexible tool in tax and retirement planning.
PRSAs offer significant advantages including:
• Transfers: A PRSA can receive a transfer from an OPS (Occupational Pension Scheme) and a personal pension, it can also transfer to an OPS. This is a huge plus compared to personal pensions which are quite restricted from a transfer perspective.
• Transfer Costs: Under legislation there can be no transfer costs associated with a transfer of pension assets to or from a PRSA.
• Phased drawdown: You can have any number of PRSAs allowing you to draw your retirement benefits from each at a time that suits your retirement planning needs and helps you
best manage the pensions cap (the Standard Fund Threshold of €2m). In the case of an OPS all benefits for an employment must be drawn at the same time and only one tax efficient lump sum can be paid for that employment if coming from an OPS.
• Post Retirement: A PRSA can be used to both accumulate a pension fund and later to distribute the benefits.
• On Death: Both PRSAs (prior to vesting) and Personal Pensions offer a payment on death that can go without deduction of tax to the estate of the pension holder. OPS (Occupational Pension Scheme) members are still restricted to a tax-free lump sum of up to 4 times salary plus a return of any personal and AVC contributions with the remainder used to purchase a spouse’s / dependent’s pension or ARF as appropriate.
For more information on these changes or to see how this may affect your situation please feel free to contact Brian Gaffney on (086) 242 7562 or brian@wporeilly.ie
Important News
New changes for pensions in the recent Finance Bill which came into force on the 1st of January this year removes a restriction on the amount that could be paid into a company sponsored pension based on your salary and service with the Employer and has opened up great opportunities for Company staff and Owners.
Contact us to get more information about this.