New pension rules have caught company directors on the hop. What are they and how do they work?

PRSA funding changes incentivised company owners/directors to fund their pensions when funds allowed, but it did lead to some 'aggressive tax planning'. Photograph: iStock

With employees still bound by the upper earnings limit for tax relief – €115,000 a year – the big benefit was for business owners, who were able to use the change to substantially boost their pension funding, gaining tax relief in the process. One example cited was a director of a company, who employed one of his children on the minimum wage, and then created a PRSA and funded it with €1 million. Or a wife could be hired on a salary of €5,000 and her pension bumped up.

It is undoubtedly a sharp reduction on the benefit that was previously in place but, as Delaney notes, it is still “very attractive” compared with what an employee is entitled to.

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