Reducing PRSA to Compensate for New Pension Levy

[Lia]

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[FONT=&quot][/FONT]A relation of mine is 50 years old and joined the public service in 2003. He currently pays around 6.5% of his gross salary into the public service pension scheme.
He also has a PRSA which he started around the same time to supplement the public service pension and into which he contributes the maximum amount allowable for tax relief.
With the new pension levy, he estimates that he will have to pay an extra 8.8% of his salary into the public service salary, making a total of 15.3% of his gross salary going to his public service pension. To make sure that all contributions are tax efficient, He is considering reducing his PRSA contributions to 14.7% of his salary to maintain the total pension contribution allowance of 30% of his salary. Does this make sense for him?[FONT=&quot][/FONT]​

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[Slim]

Is it clear that the new levy will be counted as part of the 30% maximum in your relative's case? If so, he will be restricted in what he can contribute to his PRSA. If not, he may have to consider whether or not he can afford to pay both the new levy and max out his potential PRSA contribution.

Slim

 

[Jim D]

Lia, that makes sense to stay within the 30% bracket for the moment, he can at age 54 increase to an overall 35% of gross salary if he wants. There is no tax advantage in making a PRSA pension contribution without getting the tax relief on that contribution.

 

[Dreamerb]

Is it clear that the new levy will be counted as part of the 30% maximum [...]?

No - there's been no confirmation either way, and I doubt it'll be clear for another couple of weeks. But people in this position - at or close to the max - should monitor developments for their own financial planning purposes.