If your company is like most in Ireland, its accounting year ends in December. And that means now’s the time to think about making a special contribution to your company pension – especially if you’ve experienced a strong trading year.
Read on to find out what’s good about topping up a company pension before year end, how to do it, and why you need to act promptly.
What’s all the fuss about?
Unlike personal payments to pensions, company contributions are not governed by the usual tax-relief limits. In practice, this means that many companies can make substantial contributions to the pensions of owner-directors and other key employees.
Typically, these payments can be claimed as a deduction against corporation tax, reducing the company’s tax bill.
And because the pension payments isn’t part of the individual’s income, it’s not subject to income tax, PRSI, or USC.
How do I get a piece of the action?
First, you’ll need a company – or at least an employer.
Sounds obvious, and it’s a given if you’re an owner-director or senior management in a medium-sized or large business. But if you’re a freelancer, a contractor or otherwise self-employed, it might also apply.
For example, if you use a limited company or an umbrella company for your work, you can also make employer contributions to your pension directly from your company.
Next, you’ll need a company pension scheme or a PRSA. (You can read all about company pension schemes here, and PRSAs here).
The company can either top up an existing scheme, or set up a new one and fund it promptly – we can help sort that.
How much can my company or employer pay in?
The amount an employer can pay into a staff member or director’s pension is changing from 2025. The window is closing on the chance for employers to make uncapped payments to a company pension.
Historically, there have been reasonable provisions for employers to pay lump sums into staff pensions. This took account of the fact that many business founders take little salary, and often no pension, in the early years of growing a business. It gave time to catch up.
In 2023, the rules were relaxed further, when all employer payments into a PRSA for an employee or director were lifted.
In 2025, these payments are capped once more, making this year an important one for pension planning for many business leaders. There may be actions you take before the year end to optimise your situation.
Get in touch if you would like to explore how this affects you, and what you should do about it.
The new restrictions are quite significant. In 2023, the government lifted limits on the amount that an employer could pay into a PRSA for a staff member or director. In practice, following these changes there was no effective limit on the amount that could be paid in.
Now, the Finance Act 2025 restricts the amount an employer can pay in to a PRSA to 100% of the person’s salary. On top of that, the individual can still make their age-related personal contribution.
Time is of the essence
The tax treatment of company payments to pension plans is a little different from the arrangements for individuals topping up their pensions – who still have several months to top up.
To take advantage of the corporation tax deduction, the payment must be made before the end of the company’s corporation tax year. A company is not allowed to backdate pension payments for directors or employees into a company’s previous tax year.
So now’s the time to take a hard look at your 2024 numbers. If it looks like you could save corporation tax and boost your pension provision by topping up with an employer contributions, we’d love to help.
