Which Pension Scheme Is Right for Your Employees?
If you’re a business owner or HR executive, choosing a pension scheme for your team can feel like a maze of options. In Ireland there are three main routes, and the best fit usually comes down to the size of your business.
Small Businesses (Fewer Than 10 Employees): Employer-Facilitated PRSAs
Businesses with fewer than 10 people are unlikely to meet the requirements of an occupational scheme. For most, individual employer-facilitated PRSAs are the practical alternative. They let both employer and employee contribute the amounts they choose.
Key benefits
Tax relief for both sides: Employers receive corporation tax relief on contributions, and employees receive income tax relief as standard.
Flexible contributions: You decide whether contributions are matched (for example, the employee contributes X and the employer contributes Y) or whether each side contributes independently.
No AVC needed: Employees can contribute up to their age-related limits under standard PRSA contract rules without requiring a separate AVC.
Immediate vesting: Employees own all contributions from day one.
Choice of funds: PRSAs offer a wide fund range, and charges are acceptable.
Worth knowing
Each employee has their own PRSA, which means multiple direct debits to monitor. For a small team this is manageable, but it does add some administration.
Larger Businesses (10+ Employees): The Master Trust
Once you reach 10 or more employees, a master trust generally offers a better opportunity for the group, with lower costs and simpler administration.
Key benefits
Tax relief for both sides: Employers receive corporation tax relief, and employees receive income tax relief as standard.
Flexible contributions: As with a PRSA, you can choose to match contributions or keep them independent.
Access to funds: Master trusts give members access to a broad range of funds.
Lower costs: Because costs are spread across the whole scheme, a master trust is generally cheaper than a PRSA. Separate costs, such as Pensions Authority fees, do still apply.
Simple payments: One direct debit covers all policies. It comes with a detailed breakdown that the fund provider uses to apply payments to individual accounts, in place of individual direct debits for each employee.
Worth knowing
Anything an employee contributes beyond the initial amount is treated as an AVC.
Employees need 2 years of service (preserved benefit) to be entitled to the employer’s contributions, unless the scheme states otherwise. This differs from a PRSA, where funds vest immediately.
Auto-Enrolment: The Alternative Option
If neither of the above is suitable, auto-enrolment is the third option. It is a state-mandated scheme in which both employer and employee make contributions of 1.5%.
Not Sure Which Option Fits Your Business?
Every business is different, and the right scheme depends on your team size, budget and goals. Get in touch and we’ll help you compare the options and set up the one that suits your employees best.