The finance bill of January 2023 has removed benefit-in-kind restrictions so that now an employer can make unlimited contributions to their pension. No longer is that amount dependent on one’s salary scale or length of service.
Not only can the owner/employer make personal unlimited contributions, so also can a spouse/partner have separate, unlimited contributions, from the business, into their pensions.
Previously, if an employer made a pension contribution the amount was limited by the individuals salary and number of years’ service. This is no longer the case.
An employer can now pay as much as they can afford into an employees PRSA without reference to either salary or service of the employee.
Tax relief on all employer PRSA contributions can also be claimed in the accounting period in which it is paid.
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 (SFT) of €2 million.
In summary, 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.
While these rules are now in under current legislation they may be subject to change later this year.
The changes apply to employees and shareholding directors. They also apply to shareholding directors of Investment Companies.
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.