If you’re paying into an approved pension scheme, you can get income tax relief on your contributions. This means the government gives you a tax break on what you save.
You will still pay tax later when your pension is paid to you, but for now, your savings get a boost. Tax relief is given at your highest rate of income tax (your marginal rate).
*Keep in mind: pension contributions don’t get relief from PRSI or the Universal Social Charge (USC).
Tax Relief on Contributions
When you pay into your pension, you get income tax relief at your marginal rate.
Annual Contribution Limits
There’s a cap on how much you can save each year with tax relief, and it depends on your age:
Age |
Maximum % of income
|
|---|---|
|
Under 30 |
15% |
|
30 – 39 |
20% |
|
40-49 |
25% |
|
50-54 |
30% |
|
55-59 |
35% |
|
60+ |
40% |
You can only claim relief on income up to €115,000 per year.
- For employees, this is your gross pay (before deductions).
- For the self-employed, it’s your net relevant earnings (after expenses).
**Special case: professional sportspeople or those in jobs with early retirement can claim relief on 30% of earnings, no matter their age.
If you have more than one source of income, relief only applies to the income linked to the contributions.
Overall Pension Fund Limit
There’s also a lifetime cap on how big your pension fund can grow with tax relief. This is called the Standard Fund Threshold and is currently €2 million.
If your fund is larger than that, the extra amount will be taxed at 40% when you retire.
(If your fund was already above €2 million on 1 January 2014, a higher personal limit may apply.)
Tax Relief on Lump Sums at Retirement
When you retire, you can usually take part of your pension as a tax-free lump sum.
- The maximum tax-free amount across all pensions is €200,000.
- Anything above this is taxed as follows:
Lump Sum Amount |
Tax Rate |
|---|---|
|
Up to €200,000 |
0% |
|
€200,000 – €300,000 |
20% |
|
Over €500,000 |
Your marginal tax rate |
The exact amount you can take may depend on your pension plan.
How to Claim Tax Relief
- For Employees: Most of the time, your employer will handle this by deducting contributions from your pay and applying the relief.
- If your employer doesn’t handle it: You can claim using myAccount by filing an income tax return.
- For Self-employed: You can apply through the Revenue Online Service (ROS).
Revenue also has a video guide to help you claim pension tax relief.
All information and views contained within this article is for informational purposes only and the views expressed do not constitute financial advice. U Consulting makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use. Please consult a professional financial advisor before making any financial decision.
Nothing presented in the article constitutes investment advice, it does not consider the investment objectives, knowledge and experience or financial situation of any person. You should not act on it in any way and are advised to obtain professional advice suitable to your own individual circumstances. The value of your investment may go down as well as up. You may lose some or all of the money you invest. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.
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