Dáil Éireann Debate, Tuesday - 1 July 2025
277. Deputy John Lahart asked the Minister for Finance if there are any plans for increasing the cap for PRSAs or introducing any changes on how employer contributions to PRSAs are capped; and if he will make a statement on the matter. [36060/25]
View answerPrior to 1 January 2023, where the combined contributions by an employer and an employee to the employee’s Personal Retirement Savings Account (PRSA) did not exceed the employee’s annual percentage limit, as set out in section 787E(1) Taxes Consolidation Act 1997 (TCA), the contributions were relieved from tax. The employee’s annual percentage limit is between 15% and 40% of “net relevant earnings”, varying depending on age, up to a maximum relieved salary of €115,000. However, where the combined employer and employee contributions exceeded the applicable threshold, the amount above the threshold was treated as a taxable benefit in kind (BIK) in the hands of the employee. In contrast for occupational pension schemes, employer contributions are not a BIK.
Section 22 Finance Act 2022 sought to remove the difference in BIK treatment between PRSAs and occupational pension schemes This section amended the Taxes Consolidation Act 1997, by abolishing the BIK charge on employer contributions to an employee’s PRSA. In addition, employer contributions to an employee’s PRSA were no longer counted towards an employee’s age and salary related percentage limits on tax deductible contributions. These changes were recommended by the Interdepartmental Pension Reform and Taxation Group (IDPRTG) with a view to improving, harmonising and simplifying the pension landscape in Ireland. It was expected that the amendment would likely result in a change in behaviour by encouraging increased PRSA contributions.
As with any change in tax policy, Revenue actively monitored developments since the introduction of the changes in Finance Act 2022.
From Revenue’s analysis of employer PRSA contributions in 2023, it appeared some cases suggested behaviour that was not in keeping with the policy intention of the changes. Revenue advised officials in my Department of these concerns.
Section 12 Finance Act 2024 addressed these concerns by providing for an “employer limit” on employer PRSA contributions of 100% of the relevant employee’s salary. Any contributions above the “employer limit” will be considered a taxable BIK for the employee and therefore subject to tax.
I would note that the process of ensuring that taxation relief is availed of in an appropriate manner is ongoing and continuous and involves Revenue and my Department working closely together to monitor developments, assess data and, where necessary, amend provisions to avoid misuse.
I have no plans to change these arrangements at present. However, these provisions, along with other pension taxation measures, are kept under review.
