logo
 
 

TAX ON PENSIONS

TAX RELIEF ON CONTRIBUTIONS

Tax relief on personal pension contributions can be claimed subject to the following age related scale.

Age Tax Relief Limit
(% of Remuneration)
Less than 30 15%
30 to 39 20%
40 to 49 25%
50 to 54 30%
55 to 59 35%
60 and over 40%

Note

The maximum remuneration figure used to calculate relief is €115,000 from 2011.

A single earnings cap of €115,000 applies for all types of pension contributions made by individuals but there is no cap for employer’s contributions to your current type of pension arrangements which are subject to the rules of occupational pension schemes. Personal contributions are not tax relieved from PRSI or the universal social charge.

TAXATION AT RETIREMENT

  • All tax free cash is subject to a maximum lifetime limit of €200,000. Any amount drawn by way of lump sum option which exceeds this amount will be subject to a once-off deduction of income tax (currently 20% on lump sums in excess of €200,000 but less than €575,000 and 41% plus PRSI and the Universal Social Charge (USC) on a lump sum in excess of €575,000 at the time of drawdown.
  • It should be noted that any tax-free lump sums taken from pension arrangements since 7 December 2005 will be included in this calculation.
  • The maximum threshold for the aggregation of pension funds per individual is €2,300,000 (since 7 December 2010) a higher level of governance and project management to pension schemes so that employers have better information and a reliable service

TAXATION OF PENSION INCOME

  • Pensions in payment are subject to P.A.Y.E., which is paid to the Revenue Commissioners.
  • Any withdrawal(s) from the ARF/AMRF will be subject to the individual’s top rate of income tax. This will be deducted by the ARF/AMRF provider at source under Schedule E of the PAYE system. Growth or income to an ARF/AMRF will be rolled up without any tax liability in the fund (as in the case for pension funds).

TAXATION OF ARFS

  • In the event that an individual ARF holder does not make an annual drawdown equivalent to 5% of the total valuation of funds by December each year, then an imputed distribution will be applied at the rate of 5% and taxed at the individuals’ top rate of income tax.
  • A distribution on death of an ARF to a spouse will not create a CAT or Income Tax liability.
  • A distribution on death of an ARF to a minor child will not create an Income Tax liability but may create a CAT liability.
  • A distribution on death of an ARF to a child who is not a minor child will create an Income Tax liability but will not create a CAT liability .
 

Articles

The following article may be useful resource to assit you and your loved ones in developing your retirement plan and creating a secure and safe future for you and your family.

More news

Dictionary of Terms

Want to gain a better understanding of terms used by professionals in pensions and financial organisations?

Beat the Jargon!