Key Post: PRSAs and non-salaried wives

In a family with a single earner, wife stays at home to mind kids and gets home carer allowance, if she starts a PRSA, can her husband get any tax relief on the contributions? I think I heard that the only way for any tax relief in this scenario to apply is is that wife goes back to work within a short number of years after starting the PRSA and then only she can back- date the tax relief application only for a short while. Does anyone know the exact situation here please?

Re: PRSA's and non-salaried wives

Hi Helena,

Tax relief on any kind of pension is not transferable between spouses, so I'm afraid your example person can only claim tax relief if she goes into paid employment at a later stage.

Liam D Ferguson
[broken link removed]

PRSA's and non-salaried wives

Thanks for that clarification, things are as I suspected. However, if a wife began a PRSA in 2004 and resumed paid employment in a few years time, how many years back tax relief coud she claim on her contributions please?

Re: PRSA's and non-salaried wives

I think that you can carry PRSA contributions forward for tax relief indefinitely but the Pensions Board website should clarify things on this point:

www.pensionsboard.ie

Re: PRSA's and non-salaried wives

Are there any topics here detailing a spouse's pension rights? A spouse staying at home to mind the kids most likely does not have a pension. If he/she can't get tax relief on a PRSA then it makes more sense for the taxpayer in the family to pay enough into the company pension to make sure both are adequately covered (obvious I know but worth emphasising). So what happens if the partner in employment should die, does the stay at home partner get the full benefit of the pension? What happens if both partners die, who gets the remaining pension benefit?

PS I think it would be well worth having a separate Pension FAQ as well as a PRSA one bookmarked at the top of this board. I find this topic incredibly complicated and broad and the majority of employees are not well informed about the ins and outs of this issue. Anything that would help start a dialog or database of collected wisdom on Pensions would be a good thing IMHO.

Re: PRSA's and non-salaried wives

So what happens if the partner in employment should die, does the stay at home partner get the full benefit of the pension?

Click to expand...

In general, the partner would get some pension, but the rules vary from scheme to scheme.

Re: PRSA's and non-salaried wives

That's exactly what scares me about pensions. So I have to go figure out if my wife is covered or how well. If we're not happy then we're hosed because if she wants a PRSA there's no tax relief cos she's not working..

Wandered over to pensionsboard.ie and found the following:

DEATH IN RETIREMENT
The benefits payable after the death of a pensioner in retirement varies considerably from scheme to scheme. Death in retirement benefits can be any one or more of the following:-

Guarantee Period In some cases, the pension may be guaranteed to be paid in any event for a certain number of years following retirement (most commonly 5 years). If death occurs within this period, the pension may continue in full for the balance of the guarantee period. If the guarantee period is less than 5 years, the balance of pension payments due may be paid as a lump sum.

Dependants' Pensions The most common provision in this area is a spouse's pension payable on the death of the member but the rules may provide for an alternative of a pension payable to dependants"

And from :

Providing for dependants
Pension schemes usually have benefits for you when you retire and for your widowed spouse and dependent children after your death. Not all schemes have arrangements for dependants.

Some schemes may allow you to designate the person who should benefit under the scheme so it is possible, in some cases, to nominate a person other than a spouse.

Spouse's pension

Dinosaur

There is no way of avoiding the work of finding out what benefits your spouse gets if you die.

However, you can get tax relief on a pension for your wife: the pension that you get at retirement can be set up to continue until the later of the death of you and your spouse, so that she effectively does have a pension. That pension is funded by you, and thus gets tax relief from your earnings.

d

Re: Spouse's pension

Would life assurance be an alternative or a complement to providing (albeit a lump sum rather than a regular income) for the surviving spouse? Just a thought...

Re: Spouse's pension

I'll summarise the options, all of which have been mentioned already...

(1) Check the particulars of the scheme to see what benefits will apply on the death of the member.
(2) If considered insufficient, consider (a) contributing AVCs to scheme to provide a bigger pension fund which can then be used to provide a better pension for spouse and/or (b) consider taking out additional life assurance cover (which might be possible to do under the rules of the scheme thus qualifying for tax relief - again check the scheme details)

Liam D Ferguson
www.ferga.com

So in the absence of a non-employed spouse (as in not working outside the home) there is no tax relief. The option outlined above suggests building a larger pension entitlement in the other spouse's employment. However is there not an issue upon retirement whereby the single income (pension) of the retired spouse is taxed as a single income and thanks to tax individualisation results in the marginal rate of tax being reached earlier (c. €44600) rather than the higher threshold for dual income couples. Because of this the tax relief benefit is negated.