Increasing pension contributions from 5 to 30%

[aam514]

Hi,

I'm considering increasing my contributions. I am 50.

My salary is E7,500 monthly.

I currently contribute 5%, my employer 5% (max).

So are maths correct here????

Currently
E375(5%) cost to me is E150 i.e. my marginal rate of tax is 40%

if I increase to maximum revenue limit...
E2250(30%) cost to me will be E900 i.e. my marginal rate of tax is 40%

=> Delta is E900-E150=E750 i.e. my take home pay will reduce by E750

Thank you.

 

[_OkGo_]

E375(5%) cost to me is E150 i.e. my marginal rate of tax is 40%

You have it the wrong way around. You are 'saving' the 40% by putting it in a pension.

The cost or impact to your net salary is 60% of the figure i.e. by contributing €375 to your pension, your net income is reduced by €225

You can use this to give you a better approximation of the impact to your take home pay

Budget 2023 – TaxCalc.ie

 

[AAAContributor]

if I increase to maximum revenue limit...
E2250(30%) cost to me will be E900 i.e. my marginal rate of tax is 40%

You plan on increasing your monthly contribution from €375 to €2,250 (+€1,875).

At a 40% tax rate, your take home pay will reduce by €1,125 (€1,875 x (1-40%)).

 

[fayf]

You can also make an optional additional once off lump sum AVC, for the 2022 tax year, as you have not maxed out, for the 2022 tax year, this can be paid, after the 2022 tax year, and the tax relief can be claimed against 2022. The company scheme, will be able to provide details to you, on how to do this one off payment.

 

[ClubMan]

Is it an occupational pension or a PRSA?
My understanding is that with the latter the employer and employee contributions are summed for the purposes of the age related pension tax relief limits.
E.g. if your employer contributes 5% then you can only contribute 25% to reach the 30% limit.
Whereas with an occupational scheme you can contribute 30% even if the employer is contributing another 5%.

Pension contributions

This page details bik on pension contributions made by employers

www.revenue.ie

 

[aam514]

Is it an occupational pension or a PRSA?
My understanding is that with the latter the employer and employee contributions are summed for the purposes of the age related pension tax relief limits.
E.g. if your employer contributes 5% then you can only contribute 25% to reach the 30% limit.
Whereas with an occupational scheme you can contribute 30% even if the employer is contributing another 5%.

Pension contributions

This page details bik on pension contributions made by employers

www.revenue.ie

occupational pension scheme