Key Considerations for Pensions and Investment Portfolios

As Budget 2024 approaches, significant changes could impact pensions and investments in Ireland.

 

This year’s budget may introduce several adjustments that will have far-reaching consequences for business owners, retirees, and investors alike.

 

Key Issues to Watch in Budget 2024 here in Ireland:

 

  • Old Age Pension Increase: It’s widely expected that the weekly old age pension will see an increase. While this move is politically popular, it raises concerns about long-term sustainability given the current financial pressures.

 

  • Standard Fund Threshold for Pensions: The threshold, currently set at €2 million, may be increased. This potential change would allow individuals to accumulate larger pension funds, a welcome shift after years of stagnation in this area.

 

  • Inheritance Tax Adjustments: With widespread media coverage, there is speculation that the tax-free threshold of €335,000 from parent to child could be raised, or the existing tax rate of 33% may be reduced. Both changes would significantly impact estate planning and wealth transfer strategies.

 

  • Exit Tax on Investment Funds: Currently set at 41%, the exit tax on investment fund gains might be reduced to align more closely with the 33% Capital Gains Tax on individual shares. While it’s unclear if this change will be enacted this year, the topic has gained considerable attention.

 

What We’d Like to See Change or Remain the Same:

 

  • PRSA Contributions for Business Owners: The ability for business owners to quickly build up their pension pots via PRSAs is crucial. This incentive supports those who take the significant risk of setting up businesses, the backbone of our economy. We strongly believe this benefit should remain unchanged to continue fostering entrepreneurship in Ireland.

 

  • Increase the Entrepreneurs Relief Cap: Currently capped at €1 million, Entrepreneurs Relief needs to be raised to better support and retain startups in Ireland. The existing cap is insufficient given the high costs and risks of entrepreneurship today.

 

  • Increase the Small Gift Exemption Limit: The current limit of €3,000 has not been updated in years. Raising this exemption in line with inflation would help younger generations, particularly those in their 30s, to accumulate funds for major life purchases like property.

 

  • Equalise Tax Rates on Investments: There is a significant discrepancy between the 41% tax on investment fund gains and the 33% tax on individual shares. Equalising these rates would encourage families to invest more confidently in funds, promoting better financial planning and increasing tax revenues.

 

  • Reintroduce a Savings Incentive Scheme: Similar to the old SSIA, a new savings incentive could encourage long-term saving among younger people, helping them to build deposits for home purchases and secure their financial futures.

 

What Should You Do Now:

 

  • Pension Funds Nearing €2 Million: If your pension fund is close to the €2.15 million threshold, consider holding off on changes until after the budget, as new regulations may offer more room to grow your pension.

 

  • Investment Fund Withdrawals: If possible, delay any withdrawals from investment funds to potentially benefit from a lower exit tax rate later this year.

 

  • PRSA Lump Sum Contributions: Consider making contributions to your PRSA now, ahead of any potential changes in the budget.

 

Managing Director Carl Widger emphasises,

 

“While we hope for a budget with a long-term focus, it’s crucial to be prepared for the immediate changes that may come. Our goal is to provide our clients with the insights and guidance they need to stay ahead in an ever-changing financial landscape.”

 

As we await the final details of Budget 2024, Metis Ireland remains dedicated to helping our clients navigate these potential changes with confidence and foresight. The Metis Ireland Team will be sharing live Budget 2024 Analysis on the 1st of October on the Metis Ireland social media channels. Get real time information on what this budget means for you.

If you would like to discuss your pre-budget queries, you can get in touch with our team.

Disclaimer


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.