The 2025 rule change that limits tax relief on employer contributions to PRSAs to 100 per cent of salary has sent ripples through Ireland’s business community.
Intended to tackle so-called “abuse” of the pension system, it has instead unfairly penalised long-serving business owners who have delayed their own pension funding in order to invest in their businesses, create employment, and contribute to economic growth.
This change is not targeting billionaires stashing funds offshore or exploiting loopholes. It is hitting the very people who have kept Irish SMEs alive through the financial crisis, Brexit, and the pandemic. It’s hitting business owners who, like many of our clients, went without pension contributions for years so they could pay wages, reinvest in their operations, and keep the doors open.
The pre-2025 rules rightly recognised the need to give these owners — often nearing retirement — the chance to catch up on their pensions in a tax-efficient way.
Employer PRSA contributions were not subject to the age-based limits that apply to personal contributions, provided the total benefits stayed within the Standard Fund Threshold (SFT). This was an elegant and fair solution: it did not give anyone an outsized tax break, but it did recognise the unusual funding patterns of entrepreneurs and business principals.
The Minister for Finance should reconsider this policy, which penalises those who were most committed to their businesses
But in January 2025, this framework was abruptly dismantled. A new cap of 100 per cent of salary was introduced for employer PRSA contributions eligible for tax relief — a blunt instrument with unintended consequences. Many business owners now find themselves unable to catch up on years of under-funding, effectively punished for prioritising their business over their personal retirement.
Revenue has suggested that the rule change was necessary to prevent “abuse”. But when pressed at an Oireachtas Committee, and more recently through parliamentary questions, it has struggled to back this up with evidence.
The Minister for Finance’s own response to Dáil questions suggests quite the opposite: that the vast majority — if not all — of those who made large employer contributions during 2023 and 2024 were not scheming tax-dodgers, but rather long-serving business owners using the system as intended.
And those claims that wealthy parents were funding massive PRSA contributions for their adult children? They may just be urban myths. The parliamentary record contains little or no evidence to support them.
This rule change is hitting the very people who have kept Irish SMEs alive through the financial crisis, Brexit, and the pandemic
We believe it’s time to acknowledge this misstep and move towards a more balanced, equitable solution. We are not arguing for a return to unlimited contributions for everyone. We are calling for a targeted exemption that recognises the unique position of older, long-serving business owners.
Specifically, we propose that the rules be amended to allow unlimited employer PRSA contributions (still subject to the SFT) for individuals who meet certain criteria — for example, those over the age of 50, or with more than five or 10 years of service in their company. This would not create an open-ended tax shelter, it would simply allow business owners who have genuinely sacrificed pension funding to make up lost ground before retirement, in a responsible and regulated way.
We recently surveyed more than 130 pension advisors to gauge the profession’s views on this issue. We asked them which alternative approach they would favour for long-serving company owners who need to catch up on pension savings.
Just under half preferred allowing higher contributions (subject to the SFT) for those with more than five years’ service. About one-third supported using previous years’ service allowances.
Some 11 per cent favoured raising the limit to 200 per cent of salary, while just 7.6 per cent said to leave the rule as it is.
The message is clear: professionals working at the coalface of retirement planning overwhelmingly support a more flexible, targeted solution for business owners — not the rigid, one-size-fits-all rule currently in place.
There is also a broader principle at stake. The SFT already provides a robust cap on lifetime pension benefits, ensuring equity in the system and limiting the cost to the exchequer. The annual contribution rules were never designed to micro-manage who could save what each year — particularly when catch-up contributions in later years are both prudent and necessary.
Many business owners now find themselves unable to catch up on years of under-funding, effectively punished for prioritising their business over their personal retirement
The unfortunate result of the change is a serious disincentive for responsible pension funding. It tells business owners: “You should have prioritised yourself first.” It penalises those who were most committed to their businesses and undermines Ireland’s long-standing support for entrepreneurship.
The Minister for Finance should reconsider this policy. A nuanced solution is available — one that upholds fairness, prevents abuse, and supports business owners in building dignified retirements without placing undue strain on the State.
In a country that relies so heavily on small and medium-sized enterprises, we should not be closing the door on those who’ve carried so much of the economic burden.
Glenn Gaughran is head of business development at Independent Trustee Company, a provider of self-administered pensions
