What is best option for contibuting pension

[Haille]

I availed of an early retirement pension from Dept. of Education under strands scheme at 50 years of age.I used my lump sum as part payment on an investment property which I am currently renovating.
Question 1 is if I take up work in the private sector would it be advisable for me to make large contibutions to a new pension scheme solely to reduce tax as all my 'new earnings' would be taxed at 42 % My current pension is approx.€28,500 per year.
Question 2 Is it true that any income I receive from my investment property cannot be contributed to new pension scheme even though it would be my income?
Question 3 If I succeed in gaining employment in private sector and make A1 contributions from now to 65 years of age would I also be elegible for contributary pension ? Any advice please!

 

[LDFerguson]

Question 1 is if I take up work in the private sector would it be advisable for me to make large contibutions to a new pension scheme solely to reduce tax as all my 'new earnings' would be taxed at 42 % My current pension is approx.€28,500 per year.

There would be a tax advantage in doing so, but frankly the argument is not as compelling as for other cases, on the grounds that any ensuing pension from your new plan would also be taxable, some of it at the higher rate. So you're getting tax relief at 41% on the way in (and possibly PRSI relief at 6% also) but some of the proceeds will be taxable at up to 41% on the way out.

That said, 25% of your accumulated fund will be a tax free lump sum, so it's still highly likely that the proceeds of your pension fund will be taxed at a much lower rate than the tax relief you will receive on the contributions.

Is it true that any income I receive from my investment property cannot be contributed to new pension scheme even though it would be my income?

That's true. Pension contributions can only be made in respect of "earned income". Income from property is considered "investment income". Dividends from shares are similarly excluded.

Question 3 If I succeed in gaining employment in private sector and make A1 contributions from now to 65 years of age would I also be elegible for contributary pension ?

To be frank, I don't know. The rules for qualification for the Contributory Old Age Pension are here. The phone number for the relevant office is at the bottom. Might be worth a call to clarify. Post back the result if you do.

Regards,

Liam D. Ferguson
www.ferga.com