Tax Benefits for you
By making your own contributions to your executive pension, you can minimise your personal taxes. The Government offer generous tax relief on your contributions. Your personal contributions into an executive pension will normally qualify for tax and PRSI relief at your highest rate.
So investing say, €400 a month, could cost you as little as €236, if you pay at 41% tax.
“If you make an annual contribution of €10,000 and you pay tax at the higher rate, the actual cost to you will be as little as €5,900”
Additional Voluntary Contributions (AVCs)
The maximum percentage of your earnings that you can put into a pension and get tax relief on is set out in the table and should be documented as AVCs.
| The maximum percentage of your earnings that you can put into a pension and get tax relief on is set out in the table and should be documented as AVC's |
Your age now |
% of your earnings |
Under 30 |
15% |
30 to 39 |
20% |
40 to 49 |
25% |
50 to 54 |
39% |
55 to 59 |
35% |
60 and over |
40% |
Earnings are subject to a current ceiling of €275,239 for the purpose of calculating tax relief. The percentage limits include any contributions you may be making to other pension arrangements |
Make the Most of Your Company’s Tax Benefits
A Company pension plan is a good way to minimise taxes. It means that both your company and you can avail of generous tax relief on your contributions and your money grows tax-free until you retire. You can also take part of your benefits as a tax-free cash lump sum when you retire.
The Benefits for Your Company
Your company can save corporation tax because it can treat the contribution as a business expense. Your company could also save employers PRSI on contributions.
The amount of money that a company can contribute to a company pension plan, and claim tax relief on, can be enormous.
The chart shows an example of the maximum contributions a company could make to a company pension, and get full tax relief on.
Age when contributions begin |
Maximum tax deductible contributions as % of salary |
35 |
122.49% |
40 |
142.12% |
45 |
178.16% |
50 |
248.83% |
These numbers are for an employee (who could also be a proprietary director) with no other pension plan and a normal retirement age of 60. They are based on standard assumptions as agreed the Revenue and the life offices. |
So for example, where an employee is 50 and has a salary of €75,000, the company can invest up to €186,622.50 each year to retirement, and save corporation tax on that amount.
What’s more, the contributions made by your company on your behalf don’t give rise to any personal tax liability. The company could therefore bear the total cost of your pension, with no personal cost to you.
“I never thought of taking my bonus as a pension before. But if the company puts it into a company pension for me, we both get benefits” |
Quality Independent Advice
powerlifeandpensions.com
Self Administered Pension Plan / Self Invested Pension Plan