Major Changes to PRSAs and Master Trusts in 2025 – What You Need to Know

From January 1st, 2025, significant changes are coming to the world of pensions in Ireland – especially when it comes to PRSAs (Personal Retirement Savings Accounts) and Master Trusts. These changes impact how employers contribute to pensions and how employees can best take advantage of available tax reliefs. If you’re a business owner, company director, or employee pondering retirement, it’s crucial to get your head around these updates.

Here’s a breakdown of what’s changing – and what it could mean for you.

PRSA Employer Contribution Limits Tighten

Previously, employer contributions to PRSAs weren’t subject to strict limits. From 2025, that changes. Employers can now contribute up to 100% of an employee’s total salary to their PRSA pension scheme and still receive tax relief. Anything over this cap:

• Won’t be deductible for the employer, and
• Will be treated as a Benefit in Kind (BIK) for the employee, meaning it’s taxed at their marginal rate (Income Tax, PRSI & USC).

Importantly, this 100% threshold is based on gross salary (including bonuses and benefits). It is not subject to the €115,000 cap used for personal contributions.

Can Past Earnings Be Used?

Yes – if an employee’s current year salary is lower than the previous year’s. This may be due to sick leave, unpaid leave, or social welfare-related reductions. Employers can use the prior year’s salary to calculate the contribution cap.

Personal Contributions Remain Unchanged

Employee PRSA contributions are not part of the 100% employer limit and are still eligible for personal tax relief based on age-related percentages:

• Under 30: 15%
• 30–39: 20%
• 40–49: 25%
• 50–54: 30%
• 55–59: 35%
• 60+: 40%

Tax relief on personal contributions is limited to €115,000 of income per year.

What About Master Trusts?

For occupational pension schemes under Master Trusts (like Zurich’s), the rules are more flexible. Employers can still make Ordinary Annual Contributions for current/future service and Special Contributions for past service. Tax relief applies, but large Special Contributions may need to be spread out over multiple years.

Employee and AVC contributions count toward the funding limit for Master Trusts, but importantly, employer contributions to PRSAs do not – though they do impact how much can be contributed to the Master Trust going forward.

Directors and Investment Companies – New Opportunities

One of the key wins with the updated PRSA structure is that investment companies can now contribute to PRSAs on behalf of 20% directors – something they couldn’t do under occupational pension rules. This opens new retirement planning options for SME owners.

Also, PRSA membership now qualifies an employee as being in “pensionable employment” – which can affect eligibility for other reliefs (e.g., pension term assurance).

What About Retirement and Death?

• Accessing Benefits: For PRSAs, benefits can generally be accessed from age 60 (without retiring), or from age 50 if the individual has retired from all employments.
• On Death: PRSA funds go in full to the estate and may be subject to Capital Acquisitions Tax (CAT) unless left to a spouse or civil partner.

Salary Sacrifice Is Still Not Allowed

Revenue continues to prohibit salary sacrifice – meaning an employee cannot take a pay cut in exchange for increased employer contributions without the amount being treated as taxable income.

Can You Have Both a PRSA and a Master Trust?

Yes – but with caveats. Employer PRSA contributions create a new retirement benefit, and this must be factored in when calculating allowable contributions to the occupational scheme. Careful planning is advised to avoid exceeding overall pension limits.

Summary

The 2025 changes to PRSAs and Master Trusts represent a step toward more flexible retirement options but also bring tighter controls and increased complexity. For employers, understanding the new limits is essential to avoid unintended tax charges. For employees – especially directors – this could be a golden opportunity to structure retirement savings more effectively.

If you’re considering changes to your pension strategy, now’s the time to talk to a Certified Financial Planner to understand your options. Get In Touch!