In the recent Budget there were no real major changes to pension tax relief.

Read Nelson Life Budget 2018 here.

Depending upon your employment category – Employee, Self Employed, Dual income or Director – there are many different types of pension contact that you can use to claim relief.

The types of policy you may be recommended to set up/ or have currently may be either; Personal Pension, PRSA, AVC PRSA, AVC or an Executive Pension.

Earnings cap;

The percentage of tax relief you can claim is limited by the earnings cap (set at €115,000) and by age related limits;-

under 30= 15%, 30 to 39 = 20%, 40 to 49 = 25%, 50 to 54 = 30%, 55 to 59 = 35% and 60 + = 40%.

Therefore, a 40 year old earning €130,000 per annum – maximum amount they can invest is 25% x €115,000 = €28,750.

Dual income;

If you have TWO sources of income then the “pensionable salary” must use up the earnings limit first.

This will reduce the scope to use up relief against non pensionable/self employment income.

(for more information, please read the “Tax Briefing 74″ Sept 2009, and Tax Briefing 11 – 2010″ Sept 2010).

What are the choices if you have a dual income?

If you are working for the GMS or HSE and have a dual income – you may not be entitled to contribute to a Personal Pension or PRSA if your “pensionable income ” exceeds €115,000

This always needs to be checked.

Instead, you do have the option to set up a stand alone AVC PRSA.

Why choose an AVC PRSA to claim pension tax relief?

  • Diversification
  • You can choose provider
  • Greater fund choice
  • You choose charging structure, commission payable or fee basis (we offer the facility to pay for the set up of your AVC PRSA via a fee)

Example 1 – where earnings greater than €115,000

Aoife, aged 42, earns € 140,000 and is a member of HSE pension scheme, investing 6.50% per annum = €9,100 per annum.

Aoife has self employed earnings of €35,000 per annum.

Based earnings cap € 115,000 and age related 25% – maximum investment is €28,750 in total.

Aoife already has made € 9,100 so there is scope for (€ 28,750 – € 9,100) = € 19,650

This investment could be made into a stand alone AVC PRSA (please see benefits above).

Aoife cannot make any pension investment against self employed income.

Example 2 – where pensionable employment income less than €115,000

Eileen, aged 49, earns € 95,000 from “pensionable employment” and has self employed income of €150,000

Say she invests 5% per annum into the occupational pension scheme – this equals €4,750 per annum.

There is scope here to make additional investment of € 23,750 ( 25% x € 95,000) less € 4,750 = € 19,000 into an AVC PRSA

An additional, (€115,000 – €95,000 = € 20,000 x 25%) = € 4,750 against self employed income.

This can be made to a Personal Pension or a PRSA.

If you have a financial planning or product question please contact us :

This article was written by Rory Nelson, founder of Nelson Life. Rory is celebrating 20 years in financial planning this year. Professional qualifications include; UCD Specialist Diploma in Wealth Management, Pension Trustee Practitioner PTP, UCD Professional Certificate in Stockbroking,UCD Professional Certificate in Asset Management (SIA),  QFA FLIA, Pensions Diploma, Mortgage Advice Diploma, CFP module – Tax & Estate Planning and has a degree in BA Accounting & Finance. He has regularly participated in national financial press.

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  • WARNING: The information contained in this document is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for professional tax, legal and investment advice. 

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