How to make sure your Spouse gets your Pensions Tax-Free if you pass away.
Recent changes in the Finance Act, December 2022 now mean a PRSA Pension is the better way to structure your Pension so that your Spouse inherits your Pension Tax Free in the event of your untimely death.
John A Company Director
1. Annual .
Income
John's gross salary from his business is €70,000 per annum and he has an Executive Pension valued at €500,000
2. Pay Out Upon Death
In the event of John's untimely death, the Pension pays a lump sum to his spouse, Ann, tax-free of 4 x €70,000 = €280,000
3. Pension Fund Balance
The balance of the pension fund, €220,000, is converted to an ARF (Approved Retirement Fund) now owned by his spouse, Ann. When Ann takes income from the ARF, she is liable for income tax on the payment
What Has Changed
Currently, most Company Directors have Executive Pension Schemes. In the event of your untimely death, Executive Pension Schemes, in most cases, pay a lump sum to a spouse of no greater than 4 times your salary from the pension, with the balance assessable to income tax.
PRSA Pension rules, however, allow the full value of John’s Pension, €500,000, to be paid to Ann, tax-free, with no residual income or inheritance tax issues.