Awareness of anticipated reduction (in Budget 2014) in pension funding limit low - new survey reveals

In light of the anticipated reduction in the pension funding limit to €60,000 per annum from 2014, PwC today launches a new survey to assess the awareness of pension savers of this proposed change – and how Employers are preparing to react.

Many employers expect a significant increase in the number of individuals impacted. However, they believe that the majority of people who are impacted are unaware there is an issue. Given how highly pension continues to be rated within the remuneration package, companies will want to resolve this issue quickly. It clearly represents a challenge for HR and Finance Departments within the next few months to raise awareness and formulate solutions.

Since the limit was last reduced to €2.3m in 2010 it has not been subject to indexation while the average managed fund has grown on average by in excess of 20%* in the same period. For many individuals at the limit in 2010 they probably now have built up exposure to what might be the single largest tax bill in their lives.

We hope the Budget gives clarity on how the new limits will operate to make it easier for those impacted to plan for their retirement. Additionally, tax certainty going forward will improve confidence generally within the pensions system.

Key findings in the survey included:

  • Awareness of the anticipated reduction among impacted employees is most likely to be low or zero in the majority of cases (59%)
  • Almost half (47%) of those organisations surveyed will have six or more employees impacted when the revised limits take effect from 2014. This compares with just 12% of companies with six or more employees impacted on the last occasion the limit was reduced to €2.3m in 2010. This highlights the growing issue for Irish businesses and the need for organisations to structure clear solutions for impacted employees
  • When asked for their opinions on their organisations attitude to supporting employees on tax/ legislative issues under half (45%) said they gave limited assistance. A further 34% stated that they assisted employees in availing of tax efficient benefits in addition to pension. A minority of 21% said they actively sought out tax efficient reward solutions for employees such as approved share schemes, flexible benefits etc. This shows the range of support currently available to employees depending on the culture within their particular organisation
  • Exactly half (50%) of respondents said that pension was viewed as being of high importance within the total remuneration package with a further 38% rating its importance as moderate

Donal Keating, Senior Manager, PwC Pension Solutions Group, said:

“When the pension limit was last reduced in 2010 to €2.3m the number of individuals impacted within organisations was typically no more than a handful. These were the most senior employees and consequently employers generally constructed alternative solutions on a bespoke basis.

When the reduced limits take effect from 2014 the impact will be much more wide reaching. There is a challenge for companies to create solutions which enable affected employees to accumulate and access pension benefits in a tax efficient manner. A reduction in limits will also present an opportunity for organisations to reduce the level of benefits accruing in their Defined Benefit (DB) schemes through offering employees the choice to opt out for future service.”

Other key findings in the survey include:

  • The vast majority of employers (82%) are fully aware of the proposed changes and their challenge will be to raise awareness among those impacted over the coming months
  • According to the survey, approximately half (48%) of organisations assisted impacted employees in making a Personal Fund Threshold (PFT) application to the Revenue at the time of the previous reduction in limits in 2010. We would expect that this may rise in 2014 owing to the greater number of individuals impacted within organisations
  • Only a minority of companies (31%) are as of yet seeking to re-align their normal retirement age with the new state pension ages (66 from 2014, 67 from 2021 and 68 from 2028). This means they retain control over their workforce management for now. Although it is still a minority it is a clear increase on the 8% of respondents in the 2011 survey who indicated that they intended to amend their retirement age. It will be interesting to see how this continues to develop over the next few years with more employees likely to seek to remain in employment until their state pension commences
  • The survey reveals that nearly half of organisations (47%) now only have defined contribution pension arrangements. Over a quarter (28%) have both defined benefit and defined contribution arrangements while only 13% have only defined benefit arrangements.(do we have stats on this from prior surveys?

Alan Bigley, PwC HRS & Pensions Partner, added:

“Budget 2014 is expected to put in place measures to cap subsidies for pension funds delivering an income of over €60,000 per annum. This reduction will potentially affect over 30,000 pension savers and will prove a significant HR and Pensions issue for many employers in 2014. The increased scale of the issue is likely to lead employers towards structuring tax efficient alternatives which would be applicable to all affected staff either now or in the future. There is real value for organisations in being pro-active in alerting affected employees in relation to the issue at the earliest possible juncture”.


Notes to Editor:

PwC today launches its latest Budget 2014 pension funding limit changes Survey report – examining the impact of these changes on Irish businesses and individuals. This survey also ascertains the level of awareness of the issue among both employers and affected employees and examines the likely supports which will be provided to those who are impacted.

The survey was undertaken in late August 2013 amongst the HR, Pensions and Finance Leaders across a wide range of sectors in Ireland including banking, insurance, fast moving consumer goods, pharmaceutical & medical devices, technology, retail, construction and public sector. A total of 328 organisations participated in the survey.

*source: MoneyMate

About PwC

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.