2025: Another year of change in pensions

At the end of every year, I like to do a round-up review of the Pensions landscape, and I think I start each one with a sentence like: “Recent years have seen a theme of constant change within the Irish retirement landscape and [insert current year] was no different.” Well, once again 2025 didn’t let me down and in this article, I will look back on another year of considerable change, examine some of the impacts of those changes and look forward to what might be on the horizon in 2026.

PRSAs – all changed again

We started 2025 with a change to the funding rules for Personal Retirement Savings Accounts (PRSAs) which took effect on the 1st of January. This was a significant change as the maximum employer contribution to a PRSA that could now be tax relieved by an employer and not trigger a Benefit in Kind (BIK) for the employee was 100% of the employee’s total salary in the relevant year. Although this new rule was seen as more restrictive than what was possible in 2023 and 2024, the funding rules under PRSAs remain straightforward and in many cases provide a valuable alternative for some clients that have already significantly funded under Master Trust or One Member Executive Pensions.

The changes in PRSA Funding rules prompted many company directors to seek advice from their advisors as to whether they would be better placed funding for retirement via a Master Trust, PRSA or via combination of both. Each arrangement comes with its own set of funding rules, which can make comparisons challenging.

To help advisors, Zurich created a new Maximum Funding Calculator which incorporated both funding options. This calculator produces a comprehensive report showing the maximum allowable contributions for that company director under either a Master Trust or a PRSA. With these insight advisors and their clients can make an informed decision of how best to fund for their retirement.

My Future Fund (Auto-enrolment) – will it, won’t it, it will!

2025 was a year which saw plenty of on/off speculation and media coverage of the new state run pension scheme designed to capture employees not already included in a workplace pension. This is a welcome initiative and will finally launch next month. To prepare for this change, employers have had to decide whether they wish for their employees to be covered under the new State run Auto-enrolment system or under a traditional workplace pension arrangement such as a Master Trust or PRSA. Both pension systems will now run parallel to each other, and employers have to decide which route is best for their employees.

Throughout the year, employers have been considering their specific circumstances, resources, and employee needs when deciding between Auto-enrolment and a traditional workplace pension such as a Master Trust or PRSA. As part of that process, guidance from Financial Brokers has been key to determine the options available to them and which route to take. While many will ultimately choose My Future Fund as being the most appropriate for them, at Zurich we have also seen significant growth in workplace pensions throughout the year including employees joining an existing workplace pension which was already available and some employers setting up a workplace pension for their staff for the first time.

Some of the reasons employers have favoured a traditional workplace pension include:

Employee Incentives - 40% taxpayers

For individuals paying income tax at the higher rate of 40%, pension contributions attract relief at this same rate. This is a very attractive incentive especially when you look at the equivalent incentive under the Auto-enrolment regime which is comparable to receiving tax relief of 25%.

Flexibility

Traditional Pensions are much more flexible than Auto-enrolment in the way you can contribute, invest and access your pension fund. Members can make employee contributions and Additional Voluntary Contributions (AVCs) which can receive tax relief based on their age-related limits which range between 15% and 40% of salary (capped at €115,000) depending on their age.

This differs from Auto-enrolment which does not facilitate AVCs under the current design. Members can also invest their pension in a broader range of funds than is available under Auto-enrolment and can access their fund under early retirement rules as early as age 50 which is not possible under Auto-enrolment where access is strictly linked to the state pension age of 66.

Control

Where employers set up a Master Trust for their employees, they have greater control over the scheme's administration and investment decisions. This can provide a sense of ownership and alignment with the employer’s long-term goals. They can choose their preferred pension provider and switch providers if they are not happy with the administration or investment performance being provided.

Standard Fund Threshold – increases at last

The Standard Fund Threshold (SFT) had remained unchanged since 2014 with no allowance for wage growth in the intervening years. In late 2023, the government announced a review of the regime led by an independent expert, Dr. Donal de Buitléir. The report was published by the government in September 2024 and made a number of recommendations to modernise and update the operation of the SFT.

Following the report, the government launched a multi-year plan to increase the SFT for pensions with increases in the SFT of €200,000 per year beginning in January 2026. This will continue until 2029 when the SFT will be €2,800,000. In 2030, a further change is expected as the legislation includes a further increase to that €2,800,000 based on wage growth between 2025 and 2029. From 2031 onwards further changes in the SFT are expected as the threshold will increase in line with increases in wage growth on an annual basis.

Other aspects of the regime remain under review by the government but remain unchanged for now at least, including the rate of Chargeable Excess Tax (CET) at 40%, the limits for pension lump sums of €200,000 tax free and the next €300,000 taxable at 20%. It will also continue to be possible to use any tax paid on pension lump sums at 20% to offset against CET bills which for DC savers allows an additional buffer of €150,000 in excess of the SFT applicable in that year. 

See the below table which summarises the changes up to 2029 with the figures under SFT (Effective) relevant for Defined Contribution Funds:

Year	Standard Fund Threshold	Standard Fund Threshold (Effective
2024	€2,000,000	€2,150,000
2025	€2,000,000	€2,150,000
2026	€2,200,000	€2,350,000
2027	€2,400,000	€2,550,000
2028	€2,600,000	€2,750,000
2029	€2,800,000	€2,950,000

The report also recommended revising the valuation factors for Defined Benefit schemes which are used to capitalise them to determine their value against the SFT. We understand that an independent evaluation of the age-related valuation factors proposed in the report is well underway, so further changes in that area may be legislated for in 2026.

The end of the road for one member arrangements

One Member Arrangements (OMAs) set up on or before the 21 April 2021 were given a 5-year derogation to comply with the increased governance standards associated with IORPs II. This derogation ends in April of next year. We have seen increased activity in this area already in 2025 with clients looking for advice from Financial Brokers as to where their funds should transfer with options including a Master Trust, PRSA or Personal Retirement Bond (PRB) and we expect this activity to increase significantly in the first quarter of 2026. To avoid potential sanctions, those schemes will need to wind up and transition to an alternative arrangement by 21 April 2026.

Looking forward to 2026

Pensions and retirement planning require specialist advice and both employers and employees have benefitted in 2025 from sitting down with a Financial Broker to discuss how best to navigate the variety of pension arrangements available in Ireland and decide which route is best for them. Looking ahead to 2026, change remains a constant in the pensions landscape, with Financial Brokers continuing to play a vital role in helping clients adapt, make informed decisions, and plan for their future retirement.

The information contained herein is based on Zurich Life’s understanding of current Revenue practice as at December 2025 and may change in the future.