PRSA - BIK implication

TippTopp

Hi Guys,

I have just been made aware that effective 24th June 2011 that a BIK charge is to be taken from all future employer contributions to a PRSA Pension scheme. This has no impact to the employer but to the employee only, as then the employers contribution would now be less the BIK. As an employee is very worrying news.
Is there anyway round this BIK charge or should I freeze this type of pension and switch another type of managed pension?

Pension stuff is a weak point for me. But I'd like to mind what I can while I can.

Thanks a million

Hugox1

TippTopp

There would be no BIK for you if you had a standard employee pension.

Either take one out or transfer your benefits also.

Cheers

Hugox1

TippTopp wrote: »

Hi Guys,

I have just been made aware that effective 24th June 2011 that a BIK charge is to be taken from all future employer contributions to a PRSA Pension scheme. This has no impact to the employer but to the employee only, as then the employers contribution would now be less the BIK. As an employee is very worrying news.
Is there anyway round this BIK charge or should I freeze this type of pension and switch another type of managed pension?

Pension stuff is a weak point for me. But I'd like to mind what I can while I can.

Thanks a million

TippTopp

Hugox1 wrote: »

TippTopp

There would be no BIK for you if you had a standard employee pension.

Either take one out or transfer your benefits also.

Cheers

Hugox1

Thanks a million Hugox1
Will get on the case about changing pension plans.
But for the proceeds up to June - is it better to transfer to a new plan or hold in the PRSA (as existing proceeds up to June are not subject to BIK)?

Cheers

Hugox1

BIK will be on all contributions going forward, not previous ones made even if you transfer them to a new arrangement.
Whether it is a good idea to move them will depend on where they are currently invested, charging structure etc.

Kennie1

I think the both of you have gotten the wrong end of the stick altogether

Employer's contributions were always subject to Bik but in simple terms there was an allowance for this which canceled out the employee liability, there has been no change to this whatsoever. http://www.pensionsboard.ie/en/Publications/Guide_to_Pensions/Personal_Retirement_Savings_Accounts_PRSAs_.pdf

http://www.paycheckplus.ie/2011/06/24/employer-contributions-to-prsas-clarification-on-the-application-of-income-tax-prsi-and-usc/

Hugox1 there is no such pension arrangement as a "standard employee pension"

At the moment USC and PRSI is charged on the employer's PRSA contribution up to 11%.Fina Gael has commited to reducing this to 4% in the next budget, however if you have a Occ pension USC and PRSI is not charged on the employer's contribution

So at the moment a person in a Occ Pension is better off than a person in a PRSA as a result of this treatment of PRSI/USC on employer's contributions and even if Fina Gael reduces these charges to 4 %, the employee in a Occ Pension will still be better off

Now the fact that Fina Gael recognise's that there is an unfair treatment between these two different types of pension arrangement and has commited to reducing the charges to 4% as a result suggests that they may be planning to charge 4% PRSI/USC on employers contributions to Occ Pension in the next budget.

So in summary is it worth asking your employer to set up a Occ pension on your behalf to avoid these charges? I would say hold on for the next budget and wait and see what way this pans out next December