Pension Contributions

Did you know if you were born in or later than 1961 you cannot claim a State pension until age 68? “… three out of every ten self-employed persons had pension coverage in Quarter 4 2015. This compares with 36% in the same period in 2009 and 46% in Quarter 1 2008” (CSO, Quarterly National Household Survey, Q4 2015)

There are three types of pension plan:

  1. PRSA
  2. Personal Pension
  3. Executive Pension

The first two are appropriate for employees or self-employed contributors. The latter relates to employer-sponsored plans in a company; the employer makes contributions on your behalf.

Contributions by an employee or business person to their pension plan are tax efficient. The table below outlines the maximum percentage contribution of relevant earnings (RE) on which one can receive tax relief. Relevant earnings excludes earnings from permanent and pensionable employments.

 Note that €115K is the maximum earnings figure on which the relief is based.  

Age  Max. % of NRE
 >30 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
60+ 40%

Contributions are relieved at your marginal rate of tax (up to 40%) however both PRSI & USC will apply to the contribution.

A company is obliged to make contribution on behalf of an employee/ director, to an Executive Pension Plan.

In the case of a PRSA an employer can also make a contribution however it is not obliged to. Employer contributions are treated as a Benefit-in-Kind.

Employer contributions are allowable deductions for the company. Also employers PRSI, employee PRSI and USC do not apply to Employer contributions.

Employer Contributions are only restricted by the condition that the maximum retirement fund for an employee/ executive cannot exceed €2 million.

Speak to the Tax Man on about Pension Contributions for you and your employees.

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