Revenue Note for Guidance

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Revenue Note for Guidance

787U Regulations

(1) & (2) This section provides for the making of regulations by Revenue in relation to Chapter 2C prescribing the procedure to be adopted in giving effect to the Chapter and providing generally as to the administration of the Chapter. The regulations may include provisions for specifying for the purpose of the Chapter the person who shall be treated as the administrator of a Public Sector pension scheme. Regulations made must be laid before the Dáil with the usual provisions for annulment of the regulations by way of resolution passed within 21 sitting days.

CHAPTER 2D

Pan-European Pension Product (PEPP)

Overview

This Chapter provides for relief from tax on contributions made by a PEPP contributor, engaged in a trade or profession or holding an employment in Ireland, into a PanEuropean Personal Pension Product (PEPP).

To qualify for relief, payments must be made under a PEPP contract, which complies with the conditions of Regulation (EU) 2019/1238 (referred to as the PEPP Regulation). Relief is available for contributions made in a year of assessment up to, the greater of –

  • (a) €1,525, or
  • (b) a specified percentage of the individual’s “net relevant earnings”, subject to an “earnings limit” of €115,000 as provided for in section 790A, for that year as follows -

    Age

    Percentage

    under 30

    15

    30 to 39

    20

    40 to 49

    25

    50 to 54

    30

    55 to 59

    35

    60 and over

    40
    The 30% rate also applies to any individual, below age 55, whose income is derived wholly or mainly from certain sporting activities.

Contributions to a PEPP, a Personal Retirement Savings Account (PRSA), and a Retirement Annuity Contract (RAC) and contributions to an approved or statutory scheme will be aggregated when calculating the maximum tax relief.

From 1 January 2025, where an employer contributes to an employee’s PEPP and the total of such contributions exceed the “employer limit” (as defined in section 787V), the sum of contributions made, less the employer limit shall be chargeable to benefit in kind to the employee, in accordance with section 118(1). Similarly, an employer contribution to an employee’s PEPP will only be an allowable deduction in calculating the employer’s taxable profits up to the employer limit.

Where the PEPP contributor dies pre-retirement, the PEPP fund may pass in its entirety to the estate of the deceased person, free of income tax. Where the contributor dies after benefits have commenced, the assets in the PEPP are treated in the same manner as assets in an Approved Retirement Fund (ARF).

The income arising from the investment of PEPP contributions is exempt from tax.

A PEPP which does not vest (i.e. mature or come into payment) by the date of an individual’s 75th birthday is deemed to vest (i.e. it becomes a “vested PEPP”) on that date. However, benefits may not be taken from a PEPP that vests in this manner.

The vesting of a PEPP in the manner described above, is a Benefit Crystallisation Event for the purposes of Chapter 2C of Part 30 and the PEPP comes within the imputed distribution provisions of section 790D. In addition, any assets in the PEPP when the contributor dies are treated as if they were assets of an ARF.

Similar vesting provisions apply to RACs (see Chapter 2 of Part 30) and PRSAs (see Chapter 2A of Part 30).

Relevant Date: Finance Act 2024