PRSA Pensions
PRSA or “personal retirement savings account”, is a pension plan issued by a life insurance company to an individual. Contributions can be made by the employer, by the employee or by both. You don’t need to be in employment to have this type of account however tax relief will only apply to contributions made from relevant earnings.
PRSAs are most suitable for employees who are not members of an occupational scheme and may also suit the self employed. They were designed to be flexible, portable and low cost pension products. An individual can take their PRSA with them when moving jobs.
PRSA Tax Relief
Employer contributions are treated as a benefit in kind tax deductible business expense. In addition, employer contributions are not subject to employers or employees PRSI. However the employee is subject to the USC on the employers contribution.
Individual employee contributions are tax deductible for the individual against net relevant earnings. Since Jan 1 2011 individual PRSA contributions are subject to PRSI. The employer must also pay 50% of the employer PRSI rate on the employee PRSA contribution.
There are age related percentage limits, depending on your age and these are capped to a maximum earnings ceiling of €115,000. In addition, for some professional sports people, a higher rate applies regardless of age.
It is possible to backdate contributions paid in the current tax year, to the previous tax year, once the contribution has been made before Oct 31st. It also possible to carry forward any excess contribution made, in order to gain tax relief in future years.