Key pension updates from Finance Bill 2024 and what they mean for you

Finance Bill 2024 implements taxation changes announced on Budget Day while also providing clarity on specific measures. We outline the key pension updates from the Bill below and what actions you may need to consider in light of these changes.

Employer contributions to Personal Retirement Savings Accounts (PRSAs) 

The Finance Bill introduced a new limit in relation to employer contributions to PRSAs. From 1st January 2025, the contribution cannot exceed more than 100% of the relevant employee’s remuneration in the year. Amounts in excess of this will be treated as a taxable BIK (benefit in kind) in the hands of the employee. 

Actions and considerations 

• There is still an opportunity to fund PRSAs under the current unrestricted funding model before the changes come into effect. 
• If you are planning on funding your PRSA prior to year-end, you should make  contributions sooner rather than later. 
• You could also consider bringing forward contributions from upcoming years. 
• Always consult with your tax adviser in relation to what is an appropriate level of contribution based on your role in the business. 
• Review your overall pension funding strategy in light of these changes. 

Standard Fund Threshold (SFT) 

• The Bill confirmed that the SFT will increase from its current limit of €2 million to €2.8 million by 2029.

• This is to be achieved with an annual increase of €200k from 2026 to 2029.

• There will also be an annual increase thereafter with reference to average weekly earnings. The 2030 SFT will capture the increase in earnings from 2025 to 2029 and may result in a further significant uplift at that point.

• Confirmation that the maximum tax efficient pension lump sum will remain at €500,000. 

Actions and considerations 

• Review your overall retirement strategy in light of higher SFTs in coming years.  
• Where you can afford to delay the retirement of your pension pot, this may provide an opportunity to review your contribution and investment strategy to ensure you can avail of the new thresholds in future years.  
• Where you have crystalised a pension previously, you may not benefit in full or at all from the new SFT increases. You should speak to your adviser to understand the full impact of these changes. 

Summary 

We await the Bill being passed into law in the coming weeks, which may alter some of the detail set out above. Irrespective of any specific tax changes our view remains unchanged. We believe that the key to delivering the most appropriate solution for you is to understand your individual circumstances and financial goals, as well as considering the potential impact of taxation to ensure you can meet these goals efficiently. Our dedicated team can help you to formulate a personalised plan and investment strategy based on your unique needs and circumstances.  

Contact your Davy adviser to understand the impact on your broader retirement plan and the best course of action for you.

If you’re new to Davy, why not book a consultation or visit davy.ie/pensions.