Friday 28 July 2017

FG pledge eases threat to PRSA schemes

Laura Noonan

Laura Noonan

THREATS to pension schemes operated by 17,000 companies have abated after Fine Gael this week committed to undoing tax changes that threatened the schemes' viability.

Pension experts had warned that measures introduced in the budget could obliterate Personal Retirement Savings Account (PRSA) schemes operated by companies.

The measures imposed an effective tax of 11pc on all contributions made by employers into the PRSA schemes, far higher than the tax rate on employer contributions to traditional schemes.

Fine Gael's manifesto for government confirmed that the party would lower the taxes on PRSAs to the same level as those on other schemes. "We very much appreciate their public commitment to resolving this issue," said Brian Molloy, director of HC Financial Services.

"We know that holders of employer-sponsored PRSAs will be very relieved to know that this unfair tax treatment is going to be ended by Fine Gael in the next government."

Irish Life Corporate Business chief executive David Harney last night said he "welcomed the fact that the pension issue was getting some attention", but stressed that wider pension issues would be "huge" for the next government.

The comments were echoed by Irish Insurance Federation boss Mike Kemp who said that while the PRSA move would "certainly help", there were "bigger issues" to be addressed.

Workers in smaller companies would have been hardest hit by the PRSA tax changes, since insurance sources say larger companies would simply have migrated their PRSA schemes over to traditional schemes -- an option that could be unfeasible for an SME.

It is unclear whether the PRSA changes will be undone in a 'tidying up' Finance Act later this year, or whether they will stay in place until next year's budget.

Insurance bosses expect confirmation that changes are coming should be enough to convince most companies to stick with their PRSAs, even if there are higher taxes for a year.

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