As of January 1, 2025, significant legislative changes have come into effect regarding employer contributions to Personal Retirement Savings Accounts (PRSAs) and Occupational Pension Schemes under Master Trusts. These updates directly impact tax relief rules, contribution limits, benefit access, and retirement planning strategies in Ireland.
We will break down your frequently asked questions — whether you’re a company director, business owner, or financial advisor navigating retirement solutions for employees.
Personal Retirement Savings Account (PRSA)
What are the new employer funding rules for PRSAs in 2025?
From 2025, the employer limit for PRSA contributions is 100% of the employee’s total salary in the relevant year. Contributions above this are not eligible for employer tax relief and will trigger a Benefit-in-Kind (BIK) for the employee—liable to Income Tax, PRSI, and USC at the marginal rate.
Notably, this 100% limit is not subject to the €115,000 earnings cap that applies to personal contributions.
How is ‘salary’ defined for the PRSA Employer Limit?
The employer limit is based on the employee’s Schedule E remuneration, including basic pay, bonuses, and BIKs. If an employee’s current earnings drop (due to unpaid leave, sick leave, or certain welfare benefits), the previous year’s Schedule E earnings may be used instead.
Do employee PRSA contributions count toward the employer limit?
Employee contributions do not form part of the limits on Employer Contributions to a PRSA. Employee contributions are entirely separate from employer limits. However, employee contributions are still subject to the age-related percentage limits, capped at €115,000 of earnings.
| Age | Max % of Earnings Eligible for Tax Relief |
|---|---|
| Under 30 | 15% |
| 30–39 | 20% |
| 40–49 | 25% |
| 50–54 | 30% |
| 55–59 | 35% |
| 60+ | 40% |
Source: Age-related earnings percentage limits, Revenue.ie
Since January 2023, employer contributions no longer count towards the employee’s scope to make PRSA contributions themselves.
Can an employer make a PRSA special contribution for past service?
No, it is not possible to make an Employer Special Contribution for previous service under a PRSA. Employer PRSA contributions must occur within the relevant tax year and cannot be applied retrospectively for prior years.
Does a PRSA qualify the employee as being in pensionable employment?
Yes. When an employer contributes to a PRSA, Revenue now deems it a “sponsored superannuation scheme”, classifying the employee or director as being in pensionable employment. As a result, tax relief is no longer available to employees with a PRSA that their employer is funding when using personal pensions or pension term assurance.
Can non-corporate employers contribute to a PRSA?
An employer that is a sole trader or two or more self-employed people in a partnership could contribute to a PRSA on behalf of an employee of theirs. The employee needs to be registered as an employee of that sole trader or partnership and paid a salary taxed under the Pay As You Earn (PAYE) System (Schedule E).
Assuming the sole trader or partners pay tax under Schedule D (Case I or II), then they would not be eligible to benefit from an employer contribution, as they are not employees. They could use a PRSA or personal pension to pension their self-employed income personally, subject to the age-related limits.
Can investment companies contribute to PRSAs for directors?
Yes. Unlike occupational pension schemes, an investment company could contribute to a PRSA for the benefit of a 20% director that is employed by that company, creating a viable pension route where traditional options are restricted.
Are PRSA lump sums included in redundancy calculations?
Not currently. Only lump sums from occupational pension schemes are factored into Increased Exemption and Standard Capital Superannuation Benefit (SCSB) redundancy calculations. However, Revenue may revisit this due to PRSAs’ reclassification.
When can PRSA benefits be accessed?
- For employees, retirement benefits can be accessed from age 50 onwards where employment linked to the PRSA has ended and the employee has also retired from all other employments and self-employments.
- Employees and company directors can also access benefits from age 60 onwards without having to leave service or retire from employments.
- A 20% director with a PRSA can also access benefits from age 50 onwards where the employment linked to the PRSA has ended and the individual is no longer economically active.
Can PRSA benefits be transferred?
Yes. PRSA benefits may be transferred to:
- Other PRSAs.
- Occupational pension schemes.
- Overseas pensions (though this is currently a taxable event).
Master Trust (Occupational Pension Schemes)
What are the employer contribution rules for Occupational Pension Schemes?
To determine the scope for an employer contribution to an occupational pension scheme, a member needs to take into account the calculation of their salary, previous service and current pension benefits. The rules allow contributions to be made for future service (Ordinary Annual Contributions) and for prior service (Special Contributions).
Are employer contributions tax-deductible?
Yes, with conditions:
- Contributions for current and future service are known as Ordinary Annual Contributions.Tax relief is immediate for Ordinary Annual Contributions.
- Contributions for past service are known as Special Contributions. Employers can obtain immediate tax relief on Special Contributions that are equal to or less than the employers Ordinary Annual Contributions, including all Ordinary Annual Contributions made by the employer to occupational pension schemes for all employees. Larger special contributions must be spread over 2–5 years.
Do employee and AVC contributions count toward limits?
Yes. All employee contributions and Additional Voluntary Contributions (AVCs) fall under the limits for Ordinary and Special Contributions. AVCs which are backdated to a prior year could be seen as a Special Contribution. They are also subject to the same age-related tax relief limits as PRSAs.
When can retirement benefits under a Master Trust be accessed?
- From age 50, provided employment linked to the scheme has terminated and all links with the employer are severed (and where 20% directors, company shares are disposed of.
- From Normal Retirement Age (minimum 60) without needing to leave employment or divest shares.
What are the lump sum and income options at retirement?
- Lump Sum: A maximum of 25% of the fund value can be taken, or a lump sum as calculated based on Salary & Service formula.
- Remaining Fund: Can be used to buy an Approved Retirement Fund (ARF), annuity, or taken as taxable cash (when lump sum is paid under the “25% route”). The remaining fund must be used to buy an Annuity where a lump sum is paid under Salary and Service Route (except for Additional Voluntary Contributions (AVCs)).
It’s important to note that all benefits relating to the same employment must be taken at the same time. This includes any other occupational pension benefits or Personal Retirement Bonds (PRBs) linked to the employment.
Can Master Trust benefits be transferred?
Yes, upon leaving service, members with a preserved benefit are entitled to a transfer value and may opt to transfer it to another occupational pension scheme, a Personal Retirement Bond (PRB), or a PRSA*.
*Under current rules, members would need to obtain a Certificate of Benefit Comparison to transfer to a PRSA where the transfer value relates to preserved benefits and the transfer value exceeds €10,000.
Can Master Trust benefits be transferred?
Yes, it is possible to transfer benefits overseas subject to Revenue requirements in Chapter 13 of the Pensions Manual being satisfied. No tax would be applied on any such transfer.
Difference between PRSA and Master Trust (Occupational Pension Schemes)
Can an employer contribute to both a PRSA and Master Trust for the same employee?
Yes, but they are separately regulated:
- Employer contributions to a PRSA are now subject to updated funding limits, with any amount exceeding the defined “Employer Limit” triggering tax consequences for both the employer and the employee. Contributions made to occupational pension schemes are not included in the PRSA “Employer Limit,” but they must still comply with the applicable funding rules for such schemes.
- Employer contributions to occupational pension schemes must qualify as either Ordinary Annual Contributions or Special Contributions. The contribution limits for these categories include all contributions made by the employer, employee, and any Additional Voluntary Contributions (AVCs), or PRSA AVCs related to that employment. However, employer contributions to a PRSA are not classified as either Ordinary Annual or Special Contributions and are therefore excluded from these specific limits. That said, funding a PRSA alongside a Master Trust results in the creation of a new pension benefit. This PRSA is treated as a Retained Benefit in the Master Trust's funding calculations, which may reduce the scope for future contributions to the occupational pension scheme.
Can an employee contribute to both an occupational pension and a PRSA at the same time?
Yes, but only via PRSA AVCs if they’re also in an occupational pension. However, regular PRSA contributions (non-AVC) would not be tax-relievable in this context.
Is salary sacrifice allowed when an employer funds in a Master Trust or a PRSA for an employee?
No, salary sacrifice is not permitted for pension contributions. If an employee agrees to reduce their contractual salary to facilitate an employer contribution to a PRSA or occupational pension scheme, Revenue considers this a salary sacrifice arrangement. Under Revenue guidance and Section 118B of the Taxes Consolidation Act 1997, such contributions are treated as taxable income for the employee—not as a legitimate employer expense—and are subject to Income Tax, PRSI, and USC.
What happens at retirement if both a PRSA and an occupational scheme are linked to the same employment?
- Benefits from an occupational pension scheme and a PRSA (excluding AVCs) do not need to be accessed at the same time.
- The PRSA can offer a 25% retirement lump sum independently of the lump sum option chosen under the occupational scheme.
- If the occupational scheme uses a salary and service formula for its lump sum (e.g., up to 1.5 x final remuneration), the value of the PRSA lump sum—whether taken or deferred—will reduce the maximum allowed under that calculation. In contrast, PRSA AVCs must be accessed alongside the occupational scheme, and the chosen retirement option will directly determine how the AVC benefits are paid.
What happens on death if an active member of both an occupational pension scheme and PRSA linked to same employment?
The full value of the PRSA fund is payable to the estate on death. While it may be subject to Capital Acquisitions Tax (CAT) depending on who inherits the benefit, no CAT is applied if the recipient is a spouse or civil partner.
- A = Value of employee contributions and AVCs
- B = The greater of 2 × final remuneration, or (4 × final remuneration) minus retained benefits, or €6,350.
- C = Total value of all death benefits already paid or due from Group Risk Schemes, Executive Pension Term Assurance, Occupational Pension Schemes and PRBs linked to this employment.
Final Thoughts: Choosing Between PRSA and Master Trust in 2025
- Use a PRSA for flexibility, especially for directors or employees of investment companies.
- Use a Master Trust for deeper funding, tax relief on past service, and comprehensive retirement planning.
- Use both, strategically, with professional advice to ensure compliance and optimisation.
