Year End Pension Funding Opportunity

“Change is the only constant.” As advisors we are always striving to keep abreast of the rules and regulations that influence the advice we give to our clients.

The past few years have brought significant shifts in pension planning. In 2023 a major regulatory change allowed companies to make essentially unlimited contributions into a Personal Retirement Savings Account (PRSA) for employees and directors without triggering a Benefit-in-Kind (BIK) charge. That created an exceptional opportunity for business owners to turbo-charge retirement wealth.

From 1 January 2025, however, the door has been partially closed. Employer contributions to a PRSA remain exempt from BIK only up to 100% of the employee’s or director’s salary. Contributions above that are now subject to BIK. Employee contributions themselves continue to attract age-related tax relief subject to an earnings cap of €115,000. Meanwhile, the lifetime pension fund limit (the Standard Fund Threshold or SFT) remains at €2 million for now, with phased increases scheduled from 2026 onward.

So as we move closer to year-end 2025, if you find your company with surplus profits, what are your principal options for placing that capital to best effect?

Decoding Your Four Pension Options

Keeping Profits in the Business

Retaining profits within your company remains a viable strategy. The question is: can those profits generate more value when left in the business (for investment, expansion, liquidity) versus being deployed into a pension vehicle for tax-efficient long-term growth? Given corporation tax rates, cash-flow demands and pension thresholds (e.g., SFT), the choice is one of opportunity cost and strategic planning.

Upping the Salary

Paying yourself a higher salary is the simplest route to accessing funds from the business. But this comes with higher PAYE, PRSI and Universal Social Charge (USC) liabilities and may reduce net benefit. By contrast, contributing to pension schemes often yields stronger tax relief and gives more powerful long-term leverage for retirement wealth. Hence, it is worth comparing the net impact rather than automatically choosing increased salary.

The Executive Pension Path

For company directors and senior executives, an occupational or “Executive” pension remains a strong option. Contributions are typically calculated based on salary, service years, age and retirement target age. While somewhat more complex than PRSAs, they offer structured and often generous allowances within the framework set by Revenue. One key reference point is the SFT: currently €2 million. Starting in 2026 this threshold will increase in €200,000 increments each year until it reaches €2.8 million by 2029. If you are aiming for maximised pension contributions, the Executive route continues to carry relevance, especially given the revised PRSA rules for 2025.

The PRSA Power Move (With Strategy)

The PRSA remains a flexible, accessible vehicle — especially for business owners, directors or employees in companies without a defined occupational scheme. But the rules have shifted:

• From 1 January 2025, employer contributions to an employee’s PRSA are free of BIK only where they are up to 100% of that employee’s salary.

   

• Any employer contribution above that salary threshold will trigger BIK treatment for the excess amount.

   

• Employee PRSA contributions remain subject to age-related percentage limits of earnings and the €115,000 earnings cap.

   

Here are the current age-related limits for employee contributions:

How does it play out in reality?

Patrick the Director:

Patrick is 48 years old, earns €90,000 per annum and has accumulated €450,000 in his pension fund. His targeted retirement age is 60.

Under the old unlimited-contribution PRSA regime, his company might have contributed up to near the €2 million SFT in one staging, potentially adding over €1.55 million more in a short period. Now, in 2025, his company can make employer PRSA contributions up to 100% of his salary (€90,000) without triggering BIK. Over 10 years this could add €900,000 before investment growth, bringing his potential fund to ~€1.35 million plus growth. With phased increases in the SFT starting in 2026, he also has the option of using Executive Pension funding to further close the gap toward the rising threshold.

John and Mary’s Business:

John (aged 55) and Mary (aged 53) each have pension funds of €1.1 million. They run their business with their son David (aged 35) who has already built €400,000 in pension savings.

With the SFT currently €2 million, John and Mary each have about €900,000 of available headroom. As the SFT rises over the coming years, they will gain further scope to contribute. John may choose to use an Executive Pension structure to plan around his approaching retirement, while Mary could use PRSA contributions within the salary-based employer cap and her own personal relief entitlements. David, with more time ahead, benefits from both employer PRSA contributions up to his salary and the 20% tax relief band for his age group, putting him in a strong position to accelerate growth.

Next Steps

With pension rules evolving once again, expert advice is more important than ever. The right mix of PRSA and Executive Pension planning can make the difference between simply parking profits and creating a dynamic, tax-efficient retirement strategy that aligns with your wealth and business goals.

At Riordan Financial we help business owners and directors interpret these rule changes, assess contribution strategies, compare pension vehicles and implement plans that work. The landscape may be shifting, but your retirement plan can remain steady and robust with smart planning.

Curious how the current rules could work for you ahead of year-end 2025 or as you plan into 2026 and beyond? Reach out to Riordan Financial. Let’s ensure your retirement savings are as robust as your business strategy.

*Details are based on Irish pension legislation as of October 2025 and are subject to future change.