Over the course of the last 6 – 12 months, there have been a number of changes in the Irish Pensions landscape.?
The purpose of this article is to set out the key highlights and summary points.
- Employer Contributions to PRSAs no longer count towards the age-based contribution limits. This is a big advantage for the pension funding of individuals who are receiving Employer contributions to PRSAs, rather than Occupational Schemes / Master Trusts.
- ?Finance Act 2022 has removed the Benefit In Kind (BIK) on Employer contributions to PRSAs. In some cases, this has created a funding opportunity and has created a lot of conversations and planning opportunities. As Compass Private Wealth does not advise on tax, we will always encourage the Client to receive their own tax / accountancy advice first. ?
- One-Member Occupational Schemes: Master Trusts have effectively replaced the old ‘Executive Pensions’ for one-member schemes. Master Trusts are very similar to Executive Schemes in terms of funding ability, fund choice and retirement options. There was a period in 2022 when Executive Pensions were frozen by Pension providers, but thankfully the Master Trust is now a better product for individuals and companies.
- Master Trusts replacing Company Schemes: Effectively, the Pensions Authority have put a big push on companies to transition away from their own company pension schemes with their own Trustees and have pushed companies into centralised Master Trust arrangements. It is difficult to argue with the logic here on behalf of the Pensions Authority, as the overarching objective is to simplify the schemes and ensure better governance. However, we have seen a number of transition challenges so far, so time will tell how effective the Master Trusts are
- Investment Options reined in on Small Self-Administered Schemes (SSASs). European regulations (IORPS II) have effectively narrowed down the investment options for traditional one-member company pension schemes. Borrowing is now banned and unregulated investments in total can’t account for more than 50%. There are all sorts of additional compliance requirements which are effectively designed to discourage unregulated investments and simplify the fund options for Company Directors.
- Pensions Auto Enrolment: While the industry was getting used to this project being put on the long finger, it’s now clear that energy and action is being directed towards this project and it will begin to be a very topical area and action point for Employers in 2024
- Annuity Options: Given the increase in interest rates, annuities are now becoming more popular again as an alternative to an Approved Retirement Fund (ARF), or with existing ARF funds. The big disadvantage to an Annuity is that the income dies with the policyholder, rather than an ARF which can be passed on to the next generation. However, for those who don’t have children and / or have a low-risk tolerance, this is certainly an option again.
I hope that you find the above of interest. Compass Private Wealth specialise in the technical structuring of Pensions so please do reach out to us with any queries.
Jonathan Sheahan, 23 March 2023
