BUDGET 2025 ZURICH PENSIONS
Today 01/10/2024, Jack Chambers TD (Minister for Finance) and Paschal Donohoe TD (Minister for Public Expenditure, National Development Plan Delivery and Reform) delivered the Budget for 2025 to the Dáil.
Pension changes
Automatic Enrolment Retirement Savings Scheme (referred to as AE).
Finance Bill 2024 will provide for the taxation of the Automatic Enrolment Retirement Savings Scheme (referred to as AE).
The tax treatment aligns as much as possible with that of Personal Retirement Savings Accounts (PRSAs), other than for employee contributions. Employer contributions are tax relieved, the growth in the AE funds is exempt from tax and the AE funds are taxed on draw down, other than a 25% lump sum.
The lump sum can be taken tax free up to €200,000, is taxed at 20% between €200,000 and €500,000 and is taxed at 40% above €500,000. As the State is making a direct contribution for employees within the AE scheme, there is no tax relief being provided for employee contributions to AE.
Standard Fund Threshold
We expect some changes in relation to the Standard Fund Threshold to be included in the Finance Bill 2024 which is due to be published next week.
The Taxes Consolidation Act (Chapter 2C of Part 30) imposes a limit or ceiling on the total capital value of pension benefits that an individual can draw in their lifetime from tax-relieved pension products, where those benefits come into payment for the first time on or after 7 December 2005. This is called the Standard Fund Threshold (SFT) and is currently €2 million. There are significant additional tax liabilities where the limit is exceeded.
The Minister for Finance Jack Chambers published the report of the independent examination of the Standard Fund Threshold (SFT) on the 18th September 2024. The targeted review of the Standard Fund Threshold (SFT) regime was led by an independent expert, Dr. Donal de Buitléir.
Click here for the full report
As you can see from the report a multi-year plan will be put in place to implement the recommendations of the report which include phased increases in the Standard Fund Threshold of €200,000 per year beginning in 2026 until 2029.
We will need to wait until next week to see if the proposed recommendations are implemented in the Finance Bill 2024. Read more about the Standard Fund Threshold below:
TechTalk: The future of the Standard Fund Threshold
Social Welfare Pensions
Budget 2025 confirmed that the State Pension (Contributory) Personal Rate will increase by €12 per week from €277.30 per week to €289.30 per week from January 2025.
Pensions – No changes
In summary, there were no changes in Budget 2025 to the following:
Employer Pension Contributions – Corporation Tax relief will continue to be available on Employer Pension Contributions paid to an approved Occupational Pension Scheme – subject to the overall maximum pension funding and benefit limits.
Employer Contributions to a PRSA – the Finance Act 2022 removed the Benefit-in-Kind Charge on an Employer Contribution to a PRSA. Corporation Tax relief will continue to be available on Employer Contributions to a PRSA and there is currently no limit on employer contributions to an employee’s PRSA, although there has been a lot of discussion in the media on this subject recently.
Tax Relief – Employee Pension Contributions – This relief will continue at the marginal rate of income tax but subject to the Age-Related Contribution Limits and Earnings Cap (and overall Revenue Maximum Approvable Benefit limits).
Employer Corporation Tax – The Corporation Tax Rate remains at 12.5% for the vast majority of businesses in Ireland (and a rate of 15% applies to large firms which have a turnover of €750 million or more).
Retirement Lump Sum – up to €200,000 remains tax-free and amounts from €200,000 to €500,000 will be taxed at 20%.
Mike Ainsworth
Head of Technical Services
LABrokers – Zurich Standard PRSA or PRSA AVC with 100% allocation for life of policy. Annual Management Fee of 0.75%. No hidden charges or fees.