Big Changes to Pensions in Ireland

There’s a lot happening with pensions in Ireland right now. The government is rolling out new policies to encourage saving for retirement while tweaking the rules around existing schemes.

Whether you’re an employee, self-employed, or an employer, the changes coming this year will impact for pensions. Here’s a breakdown of the key changes and what they might mean for you.

Auto-Enrolment

One of the biggest announcements is the introduction of Auto Enrolment, a scheme designed to get more people saving for retirement. Due to commence in September 2025, employees aged 23 to 60 who earn over €20,000 annually and aren’t already in a pension scheme will be automatically enrolled.

Similar schemes are already successfully established in several other countries and assist younger workers to start planning for retirement earlier. If you’ve never got around to setting up a pension, this takes care of it for you. For employers, this is a new cost to factor into budgets, so early planning is essential.

You can read about all that we know so far about auto enrolment here.

State Pension – Increases and Eligibility Changes

The State Pension has seen a modest increase in 2024. The maximum weekly personal rate is now €289.30, up by €12 from last year.

From 2025 the contributory state pension will phase out the yearly average method and replace it with the total contribution approach. Under the current system its possible to qualify for the full Irish state pension at age 66 with only 10 years’ worth of contributions.

Under the total contribution approach a total of 2,080 or more PRSI contributions will be required to receive the maximum rate of pension. This is the equivalent of 40 years working and the calculation can include full rate PRSI contributions, Long Term Carers Contributions and Home Caring Periods, credited social insurance contributions and voluntary social insurance contributions.

If your total is less than 2,080, your rate will be a percentage of the maximum rate of pension.

You can calculate your State Pension (Contributory) rate here.

Standard Fund Threshold

The Standard Fund Threshold (SFT), which limits the tax relief on your pension savings, remains at €2 million for 2024. However, it’s set to increase by €200,000 annually starting in 2026, reaching €2.8 million by 2029.

For high earners, this provides more room for tax-efficient savings in the coming years. But if your pension fund is nearing the threshold, keep an eye on your growth to avoid excess tax charges.

Those who are currently nearing the limit and planning to retire soon may benefit from reassessing their plan. Working for a few more years and continuing pension contributions may be beneficial.

Employer PRSA Contributions

From January 2025, employer contributions to a Personal Retirement Savings Account (PRSA) will be capped at 100% of the employee’s annual salary. Anything above this will be taxed as a Benefit in Kind (BIK).

Next Steps for your Retirement Planning

While the majority of the above changes are welcome, they do further increase the complexity of retirement planning in Ireland.

Our suggested steps for to stay on top of your pension planning are:

• Review your current pension arrangements. Are you saving enough to meet your retirement goals? And do any of the above changes impact the retirement path that you are currently on.

• Talk to your employer. Ensure you fully understand what the implications of the new auto-enrolment scheme or PRSA cap might be for you.

• Plan for the long term. While the State Pension is an important income element of our retirement plan, it is rarely enough to rely on in retirement. There is always potential for significant changes so private pension savings are becoming even more important.

If you’re unsure how these changes impact you, it’s a good idea to get professional advice. Retirement might seem far away, but the steps you take today will make all the difference later.