Pearse Doherty (Donegal, Sinn Fein)
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64. To ask the Minister for Finance to outline the estimated cost to the exchequer of the loophole introduce into the PRSA pension schemes in the Finance Act 2022, and subsequently closed in the Finance Act 2025; and if he will make a statement on the matter. [18023/25]

Pearse Doherty (Donegal, Sinn Fein)
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65. To ask the Minister for Finance to clarify that tax avoidance if against the law; that the use of the loophole introduce into the PRSA pension schemes in the Finance Act 2022, and subsequently closed in the Finance Act 2025 for the purpose of avoiding tax is unlawful; if general anti-avoidance regulation can be used to recoup the tax that has been lost;; and if he will make a statement on the matter. [18024/25]

Pearse Doherty (Donegal, Sinn Fein)
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66. To ask the Minister for Finance when his Department was first made aware of the loophole introduced into the PRSA pension schemes in the Finance Act 2022, and subsequently closed in the Finance Act 2025; and if he will make a statement on the matter. [18025/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 64, 65 and 66 together.

I am advised by Revenue that, prior to 1 January 2023, where the combined contributions by an employer and an employee to the employee’s Personal Retirement Savings Account (PRSA) did not exceed the employee’s annual percentage limit, as set out in section 787E(1) Taxes Consolidation Act 1997 (TCA), the contributions were relieved from tax. The employee’s annual percentage limit is between 15% and 40% of “net relevant earnings”, varying depending on age, up to a maximum relieved salary of €115,000. However, where the combined employer and employee contributions exceeded the applicable threshold, the amount above the threshold was treated as a taxable benefit in kind (BIK) in the hands of the employee.

Section 22 Finance Act 2022 removed the difference in BIK treatment between PRSAs and occupational pension schemes. The amendment abolished the BIK charge on employer contributions to an employee’s PRSA. In addition, employer contributions to an employee’s PRSA were no longer counted towards an employee’s age and salary related percentage limits on tax deductible contributions. These changes were recommended by the Interdepartmental Pension Reform and Taxation Group (IDPRTG) with a view to improving, harmonising and simplifying the pension landscape in Ireland. It was expected that the amendment would likely result in a change in behaviour by encouraging increased PRSA contributions.

I am advised by Revenue that, due to the difficulty in determining the behavioural responses to the policy change, it is not possible to robustly estimate the potential cost, if any, to the Exchequer. The legislative change was made with a view to increasing the number of PRSAs and the amounts contributed to same.

The pensions sector has undergone significant reforms in the last number of years, including the implementation of IORP II Directive, with the result that circa 160,000 small occupational pensions schemes have been wound up/will wind up by end April 2026. For the most part, these schemes are being transferred to Master Trusts or PRSAs. These reforms have resulted in an increase in the number of PRSA contracts, and the overall level of PRSA contributions. This is reflected in the Pensions Authority PRSA statistical information:

In addition, on examination of the largest employer contributions in that year, the level of salary and service suggests that these contributions would not have exceeded Revenue maximum funding limits had they been made to occupational pension schemes.

In relation to the Deputy’s second question, taxpayers are entitled to organise their affairs in accordance with the legislation. Section 22 of the Finance Act 2022 amended the rules in relation to employer PRSA contributions, meaning that the question of avoidance does not arise. As with any change in tax policy, Revenue monitored developments after the introduction of these changes in Finance Act 2022. From Revenue’s analysis of the employer PRSA contributions in 2023, it appeared some cases suggested behaviour that was not in keeping with the policy intention of the changes and advised officials in my Department of these concerns. My Department was first made aware of this in 2024 following Revenue’s analysis of data relating to employer PRSA contributions in 2023. Revenue also submitted a paper to my Department during this time outlining findings and concerns regarding how the provisions are operating.

Given the very small number of cases in this cohort, I am advised by Revenue that they are prohibited from commenting further, as per the rules for taxpayer confidentiality set out in section 851A TCA.

The process of ensuring that taxation relief is availed of in an appropriate manner is ongoing and continuous, and involves Revenue and my Department working closely together to monitor developments, assess data and, where necessary, amend provisions to avoid misuse.