by Cian Callaghan, Head of Financial Planning
I joined this profession in 2012 and have been hearing the term “Pensions Simplification” ever since. Essentially the government/regulator has been trying to make pensions simpler, more streamlined, and easier for individuals to understand.
Last week, after a decade in this profession, I saw the first change in pensions legislation that could actually lead to pensions becoming simpler and easier to use.
Last week the Minister for Finance, Paschal Donohoe, announced that the Finance Bill 2022 will provide that employer contributions on behalf of an employee to a Personal Retirement Savings Account (PRSA) will no longer be considered a benefit in kind for the employee.
So what does that actually mean? Well, we aren’t 100% sure, as the Finance Bill hasn’t been finalised yet. However, until now there’s been a pretty low limit on what your employer could contribute to a PRSA in your name. This meant that if you wanted or needed substantial employer pension contributions, you needed to set up an Occupational Pension Scheme. I won’t bore you with the details, but some of the issues with these were:
• the need for additional trustees (which incurs additional costs)
• IIORPS II legislation (restrictions on how you can invest your own money)
• Exit Penalties (insurance companies penalise you for moving your money away from them)
Thankfully, PRSAs have none of these restrictions. From January 1st, 2023 employers will be able to pay Benefit-in-Kind-free contributions to a PRSA for an employee or director.
This makes pension planning far easier for the end consumer, as there are fewer moving parts they need to consider and potentially fewer calculations when deciding how much they can or need to contribute.
I would expect there to be some further clarification in the Finance Bill before it’s signed into law in December, and I await the final version with interest.
As always, we’ll continue to provide our clients with expert financial planning and pension planning. We’re excited about these developments in the year to come, we will keep you updated.
Head of Financial Planning
Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.
All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.