Deadline is 31 October 2017, 14 November 2017 for on liners.
Nelson Life are here to assist with planning for your retirement, product and fund selection. Please contact us if you have a question 091 44 11 88 or office@nelsonlife.ie
Tax relief on pension contributions are subject to two limits:
- The earnings limit which is set at €115,000 (Net Relevant Earnings) for the 2016 and 2017 tax years
- Limits based upon Age % of Salary
Under 30 = 15% ,30 to 39 = 20%, 40 to 49 = 25%, 50 to 54 =30%, 55 to 59 = 35%, 60 and over 40%.
EXAMPLE 1: Age 45 Employment Income €150,000 Pension Employee Contribution 5% €7,500 Self-Employed Income €45,000
Based on John’s age the maximum contribution he can make to the occupational pension scheme and claim tax relief is 25% of his earnings, capped at €115,000. So John’s maximum pension contribution is 25% x €115,000 = €28,750. As he is already contributing €7,500 he has scope to pay AVCs of up to €21,250. John’s pensionable income uses up the earnings limit first and as that income is greater than the earnings limit he cannot claim tax relief against any personal pension or PRSA contributions made in respect of his self-employed earnings. This applies even if he does not maximise his AVCs to the company pension scheme.
EXAMPLE 2: Age 45 Employment Income €80,000 Pension Employee Contribution 5% €4,000 Self-Employed Income €55,000
Based on his age the maximum contribution Aoife can make to the occupational pension scheme and claim tax relief is 25% of his salary i.e. 25% x €80,000 = €20,000. Aoife is already paying employee contributions of €4,000 so has scope to make further AVCs of €16,000. Aoife’s pensionable employment uses up the earnings limit first, so she can only make pension contributions against €35,000 of self-employed earnings i.e. €115,000 – €80,000 = €35,000. So the maximum pension contribution she can pay and claim tax relief on against his self-employed earnings is 25% x €35,000 = €8,750. This applies even if she does not maximise her AVC.
EXAMPLE 3: Age 52 Employment Income €30,000 Pension Employee Contribution 5% €1,500 Self-Employed Income €60,000
Based on Kate’s age the maximum she can contribute to the company pension scheme and claim income tax relief is 30% of salary i.e. 30% x €30,000 = €9,000. She is already paying an employee contribution of €1,500 so has scope to make AVCs of up to €7,500. As her total earnings are less than €115,000, the earnings limit has no impact on the personal pension or PRSA contribution she can pay against her self-employed earnings, which based on age would be 30% x €60,000 = €18,000.
If you have a financial question please contact us
091 44 11 88 or office@nelsonlife.ie
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