As we approach Pension Season (yes, that is a real thing) Susan O’Mara from CPAS discusses what is right for you in the latest edition of Irish Building Magazine.

Typically, in Ireland, Pension Season is the run up to the Revenue deadline of 31 October, before which time you can claim back tax from the previous calendar year. As 31 October falls on a Bank Holiday this year, the deadline date has been moved forward to 27 October 2023. However, if you use Revenue’s online service (ROS), the deadline is 15 November 2023.

How does it work?

If you are a PAYE worker and a member of an occupational pension scheme or PRSA, you have the option to make an Additional Voluntary Contribution (AVC) into your pension. By doing so, you can avail of tax relief in 2023 for the contributions made in the tax year 2022.

If you are already making regular AVCs or annual AVCs, you may have scope to increase your contributions further. However, if you haven’t made any AVCs for the year 2022, you still have the option to do so before the end of October (or mid-November online).

 

Why would you backdate to 2022?

There are many reasons, but for example, if you have not contributed to an AVC for 2022, and you decide to do so now, you are then maximising the number of years you can claim tax relief before you retire.

How does the tax relief work?

For example, if you are paying tax on your income at 40%, then you can claim 40% tax relief on your pension contribution, i.e., your AVC.

AVC Paid into Pension Fund

 

€1000

 Tax relief claimed back.

 

€400

 Total Cost to you

 

€600

 

Of course €1,000 is only an example, and Revenue restrictions apply on how much you can make, based on your age and income. These are set out below.

Under Age 30 15% of Remuneration
Age 30 to 39 20% of Remuneration
Age 40 to 49 25% of Remuneration
Age 50 to 54 30% of Remuneration
Age 55 to 59 35% of Remuneration
Age 60 and over 40% of Remuneration

 

Remuneration is defined as all income assessable under schedule E from employment (including BIK and the value of shares provided under a Revenue approved share purchase plan) and is currently subject to an earnings limit of €115,000.

What is the long-term benefit other than the tax relief?

Well, to be frank, you will need an income in retirement, a phase of life that could last well over 20 years, the more you invest into your pension when working, the greater the income in retirement will be.

 

What about the self-employed?

To avoid interest and

surcharges the self-employed will need to file their 2022 Income Tax return and pay any balance owing for 2022, while also paying a preliminary income tax for 2023. These liabilities can be offset by making a pension contribution.

Contact your pension provider to get expert help.
CPAS are the specialists when it comes to pension provision and financial advice for employers and staff in the construction sector.
CPAS administer the Construction Workers Pension Scheme and the Construction Executive Retirement Savings (CERS).

Contact Susan O’Mara via email susan@cpas.ie or phone 01 2234949.