Key PRSA pension changes 01 January 2023
The Finance Act 2022 was enacted in December and its PRSA changes came into effect from 1 January 2023. This change in legislation came at a crucial time as scheme trustees must now comply with IORP II.
The Finance Act 2022 introduced a number of pension related changes, particularly in relation to PRSAs;
Improved funding limits* for employees and company directors, and all employer contributions receive tax relief in the year they are paid
Where an employee dies in service, the full PRSA fund is paid to their estate
Employer contributions to PRSAs are no longer considered to be a benefit in kind BIK
Treatment of tax-free lump sums from a foreign pension has been brought into line with Irish pensions. They are now included in your lifetime allowance.
The tax treatment of the Pan European Pension product PEPP is aligned to PRSAs
PRSA holders can drawdown their retirement benefits in stages, up to age 75, using multiple PRSAs
PRSA
The removal of the BIK charge on employer contributions will now allow employers to contribute with less restrictions to their employee’s pension contract.
Previously, if an employer contribution was made to a PRSA in excess of the specified limits (age related limits, up to maximum EUR 115,000) it was deemed a BIK liability for the employee, meaning you could invest as much money into a PRSA as you could to an occupational pension scheme (OPS) in a tax efficient manner.
PRSA transfers
A PRSA can receive a transfer from an Occupational Pension Scheme, One Member Arrangement Master Trust OMA and a personal pension, it can also transfer to an Occupational Pension Plan or a Master Trust . This is a huge plus compared to personal pensions which are restricted from a transfer perspective.
Transfer costs for a PRSA
There can be no transfer costs associated with a transfer of pension assets to or from a PRSA. Enhancing portability.
Phasing your draw-down of pension benefits
*The Standard Funds Threshold is EUR 2m. Pension tax-free lumps sums above EUR 200,000 are currently taxed at 20% (i.e first EUR 200,000 tax-free, EUR 200,000 to EUR 500,000 taxed at 20%).
Pensions relating to the same employment have to be taken at the same time, if they are within a Occupational Pension Scheme or One Member Arrangement Master Trust OMA.
However, you can have multiple PRSAs and phase your draw-down, both managing the required need to take minimum 4% per annum taxable and manage the pensions cap.
We are here to help you.
Nelson Life are here to support both or existing clients and new clients. If you would like to know more about pensions, master trusts and/or PRSAs for your company or organisation– we are here to guide you through the options and the best fit for you.
Talk to us today at 091441188 or email – ask@nelsonlife.ie
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