Pension changes in 2025: everything you need to know 

Table of contents:  

1. State pension changes 2025 and beyond  

2. Auto-enrolment pension introduction  

3. Personal pensions and PRSA changes in 2025 and beyond  

4. What does this mean for me?  

State pension changes in 2025  

With the cost of living being felt in homes and businesses across Ireland, the government have introduced a number of measures aimed at helping people cope with rising costs. Supports for families, carers, people with disabilities and pensioners have all been introduced and a €12 increase in most weekly social welfare payments came into effect from January 2025¹.  

As part of the governments cost of living measures, the State Contributory Pension is now worth €289.30 a week². 

Contributory Pension 2025 increase

As mentioned, from January 2025, the State Pension (Contributory) personal rate increased by €12 per week to €289.30 per week. It is equal to an annual increase of €624. Prior to 1^st January 2025, the State Pension (Contributory) personal rate was €277.30 per week.

Last year, from 1^st January 2024, people born after 1^st January 1958 can choose when they would like to begin receiving their State Pension (Contributory) at any age between 66 and 70. For people born before 1st January 1958, the State pension age remains 66 (and no deferral is possible)³.

These changes aim to provide people with more choices and potentially increase their State pension payments when they retire. It also means that for people who started working later in life, they will now be able to work longer in order to qualify for the State pension.

This table shows the increase in the State Pension (Contributory) between 2024 and 2025 and the rate payable depending on the age of the recipient.

Source: Citizens Information: Social welfare rates

Non-Contributory Pension 2025 increase  

A non-contributory pension is also a State pension but it differs to a contributory pension in that it is residency based and is a means-tested payment for people aged 66 or over who do not qualify for a contributory State pension based on their social insurance payment history⁴. 

To get a State pension (non-contributory), you must be aged 66 or over, pass a means test, live in Ireland and meet the habitual residence condition (HRC). You can find more detailed information and qualifying criteria for a non-contributory State pension at citizensinformation.ie and more information on applying for the State pension at gov.ie. 

This table shows the increase in the State pension (non-contributory) between 2024 and 2025 and the rate payable depending on the age of the recipient.

Source: Citizens Information: Social welfare rates

To learn more about the different State pension types and understand whether you are eligible to a contributory or an non-contributory pension, read our pensions guide.  

PRSI contributions increases

In the budget in October 2023, it was announced that a set of incremental Pay Related Social Insurance (PRSI) increases for the following five years would come into effect. In January 2025, PRSI contributions are set to increase by 0.1%.  You can learn more about this change in our Budget 2024 roundup.  

New total contribution approach for pension calculations

There are also significant changes to the method in which pensions are calculated. The current basis for determining the pension payable – known as the yearly averaging approach – will be phased out over a 10-year period and replaced with the total contributions approach.

This phasing out period commences in 2025 and will be finalised by 2034 with all pensions calculated under the total contributions approach from that point on. The total contributions approach requires 40 years’ worth of PRSI to qualify for the maximum rate of State pension with lower rates payable for those with between 10-39 years of contributions calculated on a pro rata basis. You can learn more about this change in our Budget 2024 roundup.  

Auto-enrolment pension starts in 2025  

In October, it was announced by the government that the new auto-enrolment (AE) retirement savings system will be known as ‘My Future Fund’ and will see the first enrolments under the AE savings system begin on 30^th September 2025. With a firm start date now in place, employers around the country need to prepare for the new reality of employment in this country which is that they will need to pay into a pension for employees earning over €20,000 who are aged between 23 and 60 and not already included in a workplace pension.

It is important for employers to understand that they have a choice as to how to meet their new obligations. The decision for employers is whether they wish for their employees to be covered under the new state-run AE system or under a traditional workplace pension arrangement such as a Master Trust or Personal Retirement Savings Account (PRSA). Both pension systems will now run parallel to each other and employers will have to decide which route is best for their employees. Many employers may already have an existing Master Trust or PRSA, but if all employees are not included in that arrangement, they will need to decide how best to provide pension access for those employees not already paying into a workplace pension.

It's important for employers in Ireland to familiarise themselves with the specific AE regulations. They will need to carefully consider their specific circumstances, resources, and employee needs when deciding between AE and a traditional workplace pension such as a Master Trust or PRSA. As part of that process, they will need advice and guidance from a Financial Broker to work out how best to navigate the variety of pension arrangements available in Ireland and decide which route is best for them.

If you are an employee and are eligible when the scheme launches, the National Automatic Enrolment Retirement Savings Authority will automatically enrol you⁵. You do not need to take any action.

The contributions are calculated on your gross salary – your earnings before tax. Your employer will match your contributions, and the government will contribute an additional amount. You and your employer will pay 1.5% of your annual salary in the first year and the contributions will gradually increase to 14% by year 10.

This table shows the rates you, your employer and the government will pay⁶:

This table is an example of a worker earning €20,000 a year⁶:

Read our beginner’s guide to auto enrolment to learn about eligibility criteria, contribution levels and more.  

Personal pensions and PRSA changes 2025 and beyond  

Below is a list of changes introduced in Budget 2025 and the Finance Bill that will affect pensions and PRSAs.  

Standard Fund Threshold (SFT) increases in 2026

The Standard Fund Threshold (SFT) is going to increase gradually to €2.8 million from 2026 to 2029 by €200,000 per year.  

The SFT is a cap on the total capital value of tax-relieved pension benefits that an individual can draw upon in his or her lifetime from all of their individual pension arrangements. This essentially means the limit to how much can be in your pension pot before it exceeds that limit and becomes subject to tax⁷. 

Employer contribution new limits  

Employers can contribute to a PRSA up to 100% of the employee or director’s salary. If this limit is exceeded the excess is treated as Benefit in Kind (BIK) and so taxed as income.

This replaces the PRSA changes introduced in 2023 where an employer could contribute to an employee PRSA without taking into account the age-related tax relief contribution limits. Now, they need to take into account that the tax relief applies to the contributions made up to 100% of the salary⁸.  

Employers tax deductions on PRSAs  

Employers tax deductions on PRSAs contributions are now limited to 100% of the employee’s and directors’ salaries. Currently, if an employer makes a contribution to an employee’s PRSA and the total contribution exceeds the employer limit, the sum of those contributions, less the employer limit will be subject to tax for the employee⁹.

What do these pension changes mean for me?  

Whether you are wondering if the State pension is enough to live off in retirement, how the new auto-enrolment pension scheme will work, or whether a PRSA is the right pension solution for you, a call with one of our Financial Planners can help you learn about the different plans and options available so you find the right solution for you.

Talk to a financial advisor

The information contained herein is based on Zurich's understanding of current Revenue practice as at 1st March 2025 and may change in the future. 

Sources: 

¹Gov.ie: Social welfare increases 

²Citizens Information: Contributory State pension   

³Citizens Information: State pension age

⁴Gov.ie: Changes to contributory State pension

⁵Gov.ie: Auto Enrolment FAQs

⁶Citizens Information: Auto Enrolment

⁷Gov.ie: Changes to SFT

⁸Brokers Ireland: Budget 2025 update

⁹Gov.ie: Finance Bill