Budget 2026 arrives at a time of economic recalibration. The Government’s €9.4 billion package focuses on fiscal restraint and targeted adjustments across income supports, pensions, and business incentives. Rather than introducing major new spending measures, the Budget seeks to balance economic pressures with investment in key sectors, though reactions have been mixed across the business and financial community.
For business owners and higher-income individuals, this is a budget of refinement, not revolution. It brings modest reliefs, new compliance obligations, and fresh opportunities for those willing to plan strategically. At Fairstone, we see this as a time to strengthen your financial foundations, aligning business decisions, personal wealth, and long-term goals.
The main focus of Budget 2026 is maintaining economic balance. With global growth softening, the Government has prioritised continued investment in public services and infrastructure while keeping fiscal policy steady.
What this means for you:
While the overall approach is one of continuity, it still provides scope for structured financial and business planning.
The rollout of the auto-enrolment pension scheme in January 2026 will be one of the most significant operational shifts for employers in years. Businesses must now contribute to employee pensions for those not already in a workplace scheme, a move that supports retirement security but adds a recurring cost.
Meanwhile, PRSI rates are increasing again, with employer PRSI rising to 11.25% and employee PRSI to 4.2%. Together, these changes underscore the importance of proactive financial planning.
How Fairstone can help: We help employers understand the full financial impact of auto-enrolment, build contribution costs into forecasts, and identify opportunities to align pension benefits with overall remuneration strategies.
Click the following link to read more about Auto Enrolment in Ireland
Budget 2026 reaffirmed the government’s commitment to innovation-led enterprise. The R&D (Research and Development) tax credit has increased from 30% to 35%, offering more liquidity to scaling firms, and the Entrepreneur Relief threshold has been raised to €1.5 million, supporting founders looking to reinvest in the Irish economy.
What this means for you: These measures may create opportunities for business owners who are planning future investment in areas such as product development, talent, or capital projects, depending on how they align with individual business priorities and sector trends.
While the Budget introduced a Derelict Property Tax to encourage regeneration, it also lowered VAT on new apartments from 13.5% to 9%. Together, these measures seek to increase supply and stimulate development.
If you own or invest in property, this could influence both your development pipeline and long-term portfolio strategy.
Fairstone’s perspective: Our advisers can help you assess whether property investment remains aligned with your financial objectives, taking into account your cash flow, debt profile, and diversification needs.
A key measure for investors in Budget 2026 is the reduction of the exit tax on investment funds and life assurance savings products, from 41% to 38%. This move narrows the gap between the exit tax and capital gains tax, making Irish-domiciled funds and ETFs (Exchange-traded fund) more attractive.
While personal investors now benefit from the reduced 38% exit tax rate, corporate investors in Irish funds and certain life assurance packages continue to enjoy a significantly lower 25% exit tax rate, a 13% point advantage.
Why this matters: For companies with surplus cash, investing at the corporate level offers both tax efficiency and convenience. Rather than extracting funds as salary or dividends (triggering personal tax rates up to 52%), retaining and investing cash corporately preserves more capital while maintaining liquidity for future business opportunities.
How it works: Corporate investors provide a prescribed declaration to the fund or life company to access the 25% rate. The fund handles the exit tax deduction (including on 8-year deemed disposals), and the company claims credit when filing its corporation tax return.
The right structure depends on your timeframe, succession plans, and the balance between personal wealth and business reinvestment. Many business owners find a blended approach offers optimal flexibility.
Fairstone’s role: Our investment specialists design personalised portfolios that align with your time horizon, risk profile, and long-term goals, integrating funds, ETFs, and alternative assets in a way that reflects your evolving financial picture. We help you determine the optimal structure for your investments, whether held personally, through your company, or across both.
Click the following link to read more about Investing in ETFs in Ireland in 2025
While no new income tax bands were introduced, bracket creep remains a concern. As wages rise and tax thresholds stay static, many professionals will find themselves paying higher effective tax rates, even without a formal increase.
For high earners, pension contributions, investment packages, and strategic income timing remain essential tools to manage exposure.
The rise in PRSI and introduction of auto-enrolment bring retirement planning back into focus. While these measures add cost, they also reinforce the value of personal pension planning for both employers and employees.
Whether you’re maximising your annual allowance, contributing through your company, or integrating pension assets into an overall investment plan, coordinated advice ensures your retirement savings work as hard as your business does.
Fairstone can help: We create comprehensive retirement and wealth accumulation strategies, blending pensions, investments, and protection plans to secure long-term financial independence.
For business owners preparing for exit, Budget 2026 offers a combination of continuity and opportunity. The enhanced Entrepreneur Relief remains one of the most effective tools for reducing tax on qualifying disposals, while the lower exit tax improves the investment landscape post-sale.
How Fairstone supports your next chapter:
Selling or transitioning a business is more than a transaction, it’s a pivotal life event. Fairstone’s advisers specialise in guiding entrepreneurs through that process with clarity and confidence.
Budget 2026 may not have delivered sweeping tax reform, but it creates space for structured, intelligent planning. For business owners and high-income earners, the real opportunity lies in strategic integration, ensuring every decision about your business, investments, and lifestyle works together.
At Fairstone, we help clients move from reacting to the Budget to planning proactively, making confident, informed choices about their business, wealth, and future.
Sources:
Gov.ie
Disclaimer:
This article is for general information purposes and is not an invitation to deal or address your specific requirements. Any expressions of opinions are subject to change without notice. The information disclosed should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information of the various source material, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.
In today’s competitive business environment, companies are constantly seeking ways to grow their wealth and secure their financial future. One effective strategy that has gained traction is corporate investing. By opening a corporate investment account, businesses can leverage their surplus cash to generate returns, diversify their assets, and achieve long-term financial goals. But what exactly is corporate investment, and how can it benefit your business?
Corporate investment refers to the process of using a company’s surplus funds to invest in various financial instruments, such as stocks, bonds, mutual funds, or even direct investments in other businesses. Unlike personal investing, corporate investing is done through a dedicated corporate investment account, which is specifically designed for businesses.
This approach allows companies to grow their capital while maintaining liquidity and flexibility. Whether your business has excess cash from profits or is looking to reinvest earnings, a corporate investment account can be a powerful tool to maximise returns and achieve strategic financial objectives.
A corporate investment account offers numerous advantages for businesses looking to optimise their financial resources. Here are some key benefits:
Leaving surplus cash in a standard business bank account often yields minimal interest. In contrast, corporate investing allows businesses to access higher returns by investing in a diversified portfolio tailored to their risk appetite and financial goals.
Corporate investment accounts can offer tax advantages, depending on the jurisdiction and the type of investments made. For example, capital gains tax rates may be lower than corporate tax rates, making investing a tax-efficient way to grow your business’s wealth.
By investing in a range of asset classes, businesses can reduce risk and protect themselves against market volatility. Diversification ensures that your company’s financial health is not overly reliant on a single revenue stream or market condition.
Corporate investing is an excellent way to build long-term wealth for your business. Whether you’re saving for future expansion, acquisitions, or retirement planning for key stakeholders, a corporate investment account can help you achieve these goals.
Unlike personal investment accounts, corporate investment accounts provide businesses with greater control over how their funds are managed. Companies can choose from a wide range of investment options and adjust their strategies as their financial needs evolve.
One common question businesses have is, “Can I directly invest in a company?” The answer is yes. Direct investment involves purchasing shares or stakes in another business, either as a strategic partnership or purely for financial returns.
Direct investments can be highly rewarding, especially if the target company is in a growth phase or operates in a complementary industry. However, they also come with risks, such as market volatility and the potential for illiquidity. Therefore, it’s crucial to conduct thorough due diligence and seek professional advice before making such decisions.
Many businesses opt to keep their surplus cash in deposit accounts, believing it to be the safest option. While cash on deposit offers security and easy access to funds, it often generates minimal returns, especially in a low-interest-rate environment.
In contrast, a corporate investment account provides the opportunity to earn higher returns while still maintaining a level of liquidity. By balancing cash reserves with strategic investments, businesses can optimise their financial resources and achieve better outcomes.
A close company is defined as a company controlled by five or fewer participants. These companies may be subject to a Close Company Surcharge, an additional 20% tax on undistributed investment or deposit income retained for more than 18 months after the end of the accounting period in which it arose. This surcharge can significantly increase the tax burden on businesses that hold surplus cash in traditional deposit accounts.
However, investing through certain financial instruments, such as life assurance policies (e.g., Aviva Savings Plan or Investment Bond), can help companies avoid this surcharge. Here’s how:
By leveraging these investment options, businesses can not only grow their wealth more effectively but also mitigate the impact of the Close Company Surcharge.
Every investment carries some level of risk, and corporate investing is no exception. It’s essential to assess your business’s risk tolerance and develop a strategy that balances potential returns with acceptable levels of risk. Diversification, as mentioned earlier, is a key component of effective risk management.
Your investment horizon—the length of time you plan to hold an investment—plays a crucial role in determining the appropriate investment strategy. Short-term goals may require more liquid and lower-risk investments, while long-term goals can accommodate higher-risk, higher-reward options.
Corporate investing is subject to various regulations and compliance requirements, which can vary depending on your jurisdiction and the type of investments you choose. Ensuring compliance is essential to avoid legal issues and potential penalties.
The financial markets are dynamic, and your business’s needs may change over time. Regularly monitoring and reviewing your investment portfolio is crucial to ensure it remains aligned with your goals and market conditions.
A corporate investment account is a powerful tool for businesses looking to grow their wealth, diversify their assets, and achieve long-term financial goals. By understanding what corporate investment is and the benefits it offers, you can make informed decisions that drive your business’s success.
However, corporate investing is not without its complexities. From assessing risk tolerance to ensuring regulatory compliance, there are many factors to consider. This is why seeking professional advice is so important. At Fairstone, we provide expert investment planning and wealth management advice tailored to your business’s unique needs.
If you’re considering opening a corporate investment account or exploring corporate investment opportunities, contact us today to book a no-obligation wealth management consultation and take the first step toward securing your business’s financial future.
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Financial Planning for Small Businesses: A Comprehensive Guide
Wealth Management Strategies For Business Owners in 2025
Preparation and strategy are the cornerstones of financial planning for small businesses, providing a clear roadmap to help businesses achieve their short- and long-term financial goals. From managing day-to-day cash flow to securing external funding, effective financial planning empowers businesses to make informed decisions and remain resilient amid changing market forces.
In this guide, we’ll discuss the key components of financial planning for small businesses, the benefits it delivers, and why expert financial advice is essential for success. If you are starting out, running an established small business, or navigating the challenges of being self-employed, this article will help you build a solid financial plan tailored to your goals and the realities of doing business in Ireland.
A financial plan outlines a business’s financial goals, current standing, and the steps required to reach those objectives. It includes key financial statements such as the income statement, balance sheet, and cash flow projection. Together, these elements provide a snapshot of the business’s finances, helping owners monitor progress, make data-driven decisions, and adjust strategies as needed.
Importantly, a financial plan is not static. Businesses must regularly revisit and update their financial plans to reflect real-world results, market changes, and new opportunities. This adaptability ensures that businesses remain on track to achieve both short-term milestones and long-term financial goals.
A well-crafted financial plan delivers numerous benefits to small businesses, including:
Financial planning aligns the entire organisation by providing clarity on goals, responsibilities, and timelines. When everyone understands what needs to be achieved and how success will be measured, businesses can operate more efficiently and collaboratively.
Cash flow is the lifeblood of any small business. By forecasting cash inflows and outflows, a financial plan helps businesses anticipate challenges and take proactive steps to maintain liquidity during slow periods.
Financial planning includes realistic budgets and projections based on sales forecasts and anticipated expenses. These insights allow businesses to allocate resources effectively and prepare for growth opportunities while safeguarding against financial volatility.
For small businesses seeking investors or loans, a financial plan serves as a critical tool for building trust. Lenders and investors want assurance that their money will be used wisely, and a well-prepared plan demonstrates financial discipline and sustainability.
Regularly comparing financial results to projections allows businesses to monitor performance, identify potential problems, and adjust their strategies as necessary. This ongoing evaluation ensures that businesses remain agile and adaptable.
Self-employed individuals in Ireland face unique financial challenges, particularly in today’s economic environment, where survival often takes precedence over personal wealth accumulation. While managing your business is the priority, neglecting your personal financial plan can have a lasting impact on both your business and personal life. Here are several steps self-employed individuals can take to enhance their financial stability:
For many self-employed individuals, pensions have been a neglected area due to distrust or financial pressures. In Ireland, pension funds often underperform due to high fees and a lack of diversification, particularly in domestic-focused investments like Irish property and shares. Take time to review your pension plan to:
Pension contributions remain a powerful tool for self-employed individuals, offering tax deductions at your marginal rate and the ability to build a tax-sheltered retirement fund. Remember, a pension also provides security from creditor claims in the event of bankruptcy.
Effective cash flow management is vital, especially when funding quarterly tax payments or managing seasonal income fluctuations. To avoid liquidity traps:
This disciplined approach ensures you have funds available for obligations without placing unnecessary strain on your business.
The temptation to cut insurance costs can be strong in challenging times, but cancelling policies can expose you to significant financial risks. Review your policies to determine their relevance and explore more cost-effective options, such as:
Estate planning is often overlooked by self-employed individuals, but a well-structured plan ensures your wealth and business can be transferred to your beneficiaries efficiently. Key considerations include:
If you are in a partnership, clarify what happens to each partner’s shareholding should one of you pass away.
Planning for retirement is critical for self-employed business owners. Ideally, your business should be structured and systemised so that it can operate independently of you, making it a saleable asset. Understanding tax concessions and exit strategies will help you maximise after-tax proceeds from a business sale when you decide to retire.
For some small business owners, switching from a sole trader to a company structure can bring significant advantages, including:
However, this structure is only beneficial if your business generates consistent surplus income. Review your structure annually to determine what’s most suitable for your financial position.
To create a comprehensive financial plan, small businesses must include the following key elements:
The income statement (or profit-and-loss statement) provides an overview of revenue, expenses, and net profit or loss over a specific period. Key components include:
A balance sheet highlights the business’s financial standing by detailing assets, liabilities, and shareholder equity:
Cash flow projections analyse how much cash is coming in, where it’s being spent, and how much will be available in the future. Understanding cash flow helps businesses maintain liquidity, plan for contingencies, and make smarter investment decisions.
A personnel plan outlines the workforce required to achieve business goals. It evaluates existing roles, identifies staffing needs, and projects costs for salaries, benefits, and future hires. This ensures that businesses have the right team in place to drive growth.
Key performance indicators (KPIs) and financial ratios offer valuable insights into specific aspects of a business’s performance. Examples include:
While financial planning for small businesses is essential, navigating the process can be complex and time-consuming. Seeking expert financial advice ensures that your plan is realistic, tailored to your unique needs, and aligned with your long-term goals.
At Fairstone, our team of experienced financial planners understands the challenges that small businesses and self-employed individuals face in Ireland. We offer comprehensive financial planning services to help you:
With our expertise in financial planning for small businesses in Ireland, we provide personalised advice and practical solutions to help your business thrive. Book a no-obligation financial planning consultation with one of Fairstone’s experts today and discover how we can support your success.
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Wealth management is a cornerstone of financial success, particularly for entrepreneurs navigating the complexities of business ownership. As 2025 approaches, evolving financial landscapes and regulatory shifts make it crucial to adopt strategies that not only protect but also grow wealth effectively. This comprehensive guide explores financial planning and wealth management strategies for business owners, focusing on asset protection, tax-efficient wealth extraction, diversified investments and exit strategies. These insights are tailored to equip entrepreneurs with actionable solutions to secure their financial future.
For entrepreneurs, the first step in wealth management is protecting their assets. Unexpected events—such as the loss of a key employee or partner—can jeopardise a business’s stability. Implementing robust asset protection measures ensures continuity and mitigates financial risks while supporting long-term financial planning.
Protecting your business from unforeseen events is paramount. As a business owner, you are a key asset to your company, and ensuring continuity in the event of illness or death is essential. Proper management for business owners ensures financial stability for the company and family alike.
This policy safeguards the business against financial losses incurred due to the death or serious illness of a critical employee or director. The company receives a lump sum payment, ensuring stability during challenging times.
Ownership structures can become complicated if a shareholder or partner passes away. Without a plan, their shares may default to their estate, leaving the remaining owners to negotiate their purchase. Shareholder and partnership protection ensures that the funds needed to buy back shares are readily available, preserving the company’s stability and leadership.
This life insurance policy provides a tax-free lump sum to the families of employees or directors in the event of their death while employed by the business. For business owners, this policy is not only a compassionate benefit but also an effective financial tool, with premiums qualifying as tax-deductible expenses.
Executive income protection provides up to 75% of your pre-disability income if you are unable to work due to illness or injury. The policy covers payments until you return to work, reach retirement age, or pass away. This tax-efficient benefit allows business owners to safeguard their personal income without placing undue strain on the company.
Extracting wealth from your business efficiently is a critical component of wealth management for entrepreneurs. The traditional methods of taking salaries or dividends often lead to significant tax burdens. In 2025, alternative strategies can help maximise wealth extraction while minimising liabilities.
Traditional methods of paying yourself through salaries or dividends often result in high taxes. While these approaches remain relevant, exploring alternative strategies can significantly reduce your tax burden.
Pension contributions are one of the most tax-efficient ways to extract wealth from your business. By contributing profits to a pension plan, you can:
Personal Retirement Savings Accounts (PRSAs) and Executive Pensions offer flexible and scalable options for business owners. Depending on your circumstances, these plans can help you maximise contributions and prepare for a secure retirement.
Even if retirement feels far away, planning now can ensure a smooth transition when the time comes. A well-thought-out exit strategy not only secures your financial future but also preserves the legacy of your business.
Before transitioning out of your business, calculate your “magic number”—the amount of money you need to maintain your desired lifestyle post-retirement. This figure will guide decisions about selling the business, reinvesting profits, or restructuring assets.
When selling your business, there are several avenues to consider:
Proper planning can help you leverage available tax reliefs to maximise the value of your business sale.
Retirement relief eliminates or reduces capital gains tax (CGT) on business sales. For owners aged 55 to 65, selling to a child incurs no CGT, while sales to others qualify for relief up to €750,000. For those aged 66 and above, the limit reduces but remains a valuable tool for extracting wealth tax-efficiently.
Read more about retirement relief for business owners in the following link.
Entrepreneur relief lowers the CGT rate from 33% to 10% on the sale of business assets, applicable up to €1 million. This relief is especially advantageous for owners transitioning into other ventures or preparing for retirement.
Focusing solely on your business as your primary investment can be risky. Diversifying wealth through structured investments ensures financial resilience. Incorporating professional investment advice further enhances your financial prospects.
Corporate investment bonds allow businesses to invest surplus funds tax-efficiently. The growth on these bonds is only taxed upon withdrawal, enabling capital to compound over time. This approach provides a financial safety net without locking up funds indefinitely.
Once you’ve extracted profits from your business, reinvesting them in a diversified portfolio can balance risk and reward. Working with a financial adviser to allocate assets across equities, bonds, property, and cash ensures alignment with your risk tolerance and goals.
Hiring family members within your business offers both practical and financial benefits. By splitting income across family members, you can reduce the overall tax liability while supporting your loved ones’ financial independence.
Whether you’re selling to family, merging with another company, or passing on your business to employees, a clear exit strategy ensures a smooth transition. Determine your “magic number”—the amount you need from a sale to maintain your desired lifestyle—and plan accordingly.
Life insurance policies, such as Death in Service, can provide tax-free payouts to the estates of deceased employees or directors. This ensures financial stability for families while offering tax benefits for the business.
Mapping out your financial future using cash flow modelling helps identify gaps and opportunities in your plan. By understanding your current financial status and future goals, you can make informed decisions that align with your long-term objectives. This tool identifies:
By working with a financial advisor, you can adjust your plan in real time, ensuring it remains relevant and effective.
The coming year brings new challenges and opportunities for business owners. Rising inflation, changing tax regulations, and evolving financial markets make a wealth management strategy for 2025 indispensable. Here’s why it matters:
At Fairstone, we specialise in expert financial planning, investment advice and wealth management strategies for business owners. Our team is here to guide you through the complexities of asset protection, tax-efficient wealth extraction, and investment planning. Whether you’re looking to grow your wealth or prepare for the next chapter of your life, we’re committed to helping you achieve your financial goals.
By implementing these tailored wealth management strategies for business owners, you can secure your legacy, protect your business, and ensure long-term financial stability. Get in touch with us today to book a no-obligation wealth management consultation and start building your strategy for 2025 and beyond.
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For business owners, retirement is an important turning point. In addition to securing a comfortable retirement, entrepreneurs frequently want to do it in a way that minimises their tax liability. Retirement relief in Ireland for business owners offers substantial savings by reducing or even eliminating Capital Gains Tax (CGT) on the sale of business assets. In this article you’ll find how retirement relief for business owners works, what’s the eligibility criteria, and strategies for maximising its benefits.
In simple terms, retirement relief enables business owners to transfer or sell their company assets to reduce their capital gains tax (CGT). The current CGT rate in Ireland is 33%, which can result in a substantial tax burden when selling valuable assets. However, under specific circumstances, retirement relief can reduce this liability offering business owners who want to leave their companies a strong incentive.
However, it is not necessary to completely stop working in order to take advantage of this tax benefit. When they sell their company or stock, business owners might still profit from tax advantages. This flexibility makes retirement relief an attractive option for phased exits or gradual transitions out of business operations.
When transitioning out of their business retirement relief is essential for business owners looking to preserve their wealth. However, understanding the rules and recent updates in this field is crucial to avoid unwanted tax burdens.
In order to take advantage of retirement relief, each individual is subject to qualifying criteria, such as:
The amount of retirement relief you can claim depends on several factors, including the age at which you dispose of the business assets and the market value of those assets.
– Disposal Under Age 66: If you are between 55 and 65, you can claim full retirement relief for qualifying assets up to €750,000 based on the market value at the time of the disposal. Any amount above this threshold will be subject to CGT, with marginal relief applied to limit the tax liability.
– Disposal Over Age 66: For those over 66, the limit decreases to €500,000. Similar to the under-66 threshold, marginal relief applies if the asset’s value exceeds this amount.
For contractors and business owners who decide to wind down their companies rather than selling to a third party, retirement relief can be claimed while the company is being liquidated. By appointing a liquidator to manage the legal and financial aspects of the process, business owners can access remaining funds with minimal CGT impact assuming that the core criteria requirements are met. Liquidation costs can potentially be tax-deductible as business expense
In order to maximise the benefits available under retirement relief, it is necessary to ensure that there is proper advance planning. Here are some steps to consider:
– Calculate Your Retirement Target: First, determine what income you would like to receive during retirement. Create a cash flow model to project your future expenses, debts, assets, and lifestyle goals. This will help you identify the “magic number” needed to retire comfortably.
– Assess The Value Of Your Business: If you anticipate that your business may exceed the retirement relief limits (€750,000 or €500,000, depending on your age), then consider taking reasonable steps such as transferring the shares to your spouse who also satisfies qualifying criteria. Both spouses are entitled to claim retirement relief separately however transfers to spouses use up the total applicable threshold.
– Consider Pension Funding: Redirection of profits into a pension plan can reduce the value of the business and provide another tax-efficient way to extract value over time. This approach aligns with long-term retirement goals and keeps the business value within retirement relief limits.
remain within the retirement relief limits.
– Plan the Timing of Your Exit: The timing of asset disposal significantly impacts your tax liability. For example, waiting until you’re under 66 can allow for a higher retirement relief threshold, while ensuring that your child inherits assets within six years of your disposal can prevent potential clawbacks.
Let us assume that a business owner under the age of 66, estimates that his or her business would increase in value over the €750,000 mark within five years. To prepare for this eventuality, they could take a few moves and exit the market while rendering the tax payable as small as possible:
The retirement relief budget for 2025 introduced critical updates to the structure of retirement relief:
Retirement relief presents a valuable opportunity for business owners to reduce or eliminate CGT. However, maximising this benefit involves navigating complex criteria, timing asset disposals effectively, and integrating strategies such as pension funding and share transfers. The intricate nature of these decisions highlights the importance of professional assistance.
Fairstone experts can provide comprehensive retirement planning guidance tailored to your unique needs. With a thorough understanding of retirement planning strategies and the most recent legislative changes, Fairstone’s team can help you develop a retirement plan that optimises relief benefits while aligning with your long-term financial goals. This expert support ensures that you make informed choices, protecting the wealth you have built and setting you on a path to a secure and rewarding retirement. Book today your no-obligation retirement planning consultation with Fairstone.
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Understanding the upcoming implementation of auto-enrolment for business owners and its potential implications is crucial. This article aims to shed light on the upcoming pension scheme proposal, which seeks to encourage greater private sector pension contributions. With only about 35% of private sector employees currently saving for retirement, the government aims to raise this number to 70% and beyond.
Understanding the significance of adequate retirement savings is of utmost importance for business owners.
Auto-enrolment is set to launch in January 2026, targeting employees aged between 23 and 60 who earn €20,000 or more across all employments and are not currently contributing to an existing employer pension scheme. Under this scheme, eligible employees will be automatically enrolled, simplifying the process of saving for retirement.
According to the proposed scheme, which is subject to specific draft legislation, both employers and employees will contribute matching amounts. In the first year, the suggested contribution rate is 3.5% of the employee’s salary. This means the employer and employee each contribute 1.5%, while the state adds an additional 0.5%. Understanding these contributions is essential for business owners to navigate the new regulations effectively.
One significant aspect of auto enrolment for business owners is that the state contribution serves as a 33% boost to the employee’s contribution, rather than the traditional income tax relief. This change can have notable implications for higher tax rate earners, potentially resulting in a loss of tax relief compared to an occupational pension scheme.
The contribution requirements under the auto-enrolment scheme are expected to increase every three years over a phased-in period. Within ten years, the total contribution is projected to reach 14%, with employers and employees contributing 6% each, along with an additional 2% from the state. Importantly, these contributions will only apply to earnings up to €80,000. Earners in the higher tax rate bracket may experience a significant loss of tax relief under auto-enrolment compared to an occupational pension scheme.
While we appreciate the government’s efforts to increase pension funding through auto-enrolment, it is important to recognise that it may not be a perfect solution. Taking proactive steps to establish your own pension scheme offers benefits such as administration control, investment choice, cost management, compliance, and attracting and retaining talented individuals. We understand that auto-enrolment can be overwhelming, and our team of expert pension advisors is here to help you navigate this change and understand its impact on your business.
Don’t hesitate to reach out to us for more information. Book today a no-obligation retirement planning consultation with Fairstone.
Updated 22nd October 2024
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Finance Bill 2024: Changes in PRSA, BIK, SFT and Auto Enrolment
