Key Post Employer schemes are far better than PRSAs

Brendan Burgess

An employer who has been contributing to a PRSA for an employee should consider setting up an Occupational Pension Scheme.

Occupational Pension Scheme
The employers contribution to the scheme is an expense of the company.
There is no employers' prsi payable on it.
The employee pays no benefit-in-kind, USC or PRSI on it.

It is not governed by the contribution limits e.g. 15% of salary for someone under the age of 30. There are funding limits, but they are very generous.

Employer's contribution to an employee's PRSA
The employer pays employers PRSI at half the normal rate

The employee gets a BIK and so pays up to 11% between USC and PRSI.

The employer's and the employee's contribution must not exceed a certain percentage of salary for that person's age.

Employee's own contribution to their PRSA
The employer has paid 10.75% employer's PRSI on the salary payment to the employee.
The employee has paid employee's PRSI and the USC on the salary.

The only relief is the tax relief.

Employee's contribution to their PRSA via payroll
If it's deducted from their salary, the employer pays only half the Employers PRSI rate

Note: Fine Gael have said that they will remove these anomalies
But even if they do, they exist at the moment and are worth exploiting.

Setting up an occupational pension scheme should cost the same as a PRSA
Individual schemes can be set up for different employees.

An employer could set up a regular pension contribution and stop it later
When offering a new employee a salary package, an employer probably should offer a pension contribution and a lower salary as this would be better for everyone. If at some stage, the employee no longer wanted the pension contribution, the employer could stop it and pay an increased salary.

An employer could not reduce an existing employee's salary and contribute the reduction to a pension scheme as this would be salary sacrifice.

Employers may make one-off contributions to an employee's pension fund
Salary sacrifice is not allowed. For example, an employee cannot be given a choice of a bonus to be paid as salary or as pension.

But an employer could choose to make a discretionary contribution to a pension scheme instead of paying a discretionary bonus.


Registered User
Finance Bill 2015 provides for an exemption for employees from USC on employer contributions to a PRSA, to bring the USC treatment of such contributions in line with employer contributions to occupational pension schemes.