# How to calculate pension tax relief with 2 pensions



## arbitron (30 Apr 2017)

I want to max out my pension contributions.  I am due to see financial advisor soon but trying to get my head around it before we meet so I am not playing catch up.

Pension 1:
Public service, defined benefit 
Gross annual salary €50k = €4,300 gross pcm
Employer pension contribution: Nil
Employee pension deduction: €210 pcm

Pension 2:
Private company, defined contribution
Gross annual salary €70k = €5,800 gross pcm
Employer contribution 7% of gross: €400
My contribution 20% of gross: €1,150

I am in in the 30-39 age range so I know my max relief is 20%, but is that 20% of gross or net of income tax?

My gross annual income is €120k and I thought that this put me over the €115k but Revenue and other sources refer to "net relevant earnings" so may be I am not at the max?

I have no idea how to treat the public service pension - do I count the €210 deduction?

Can I just increase contributions to Pension 2 to 20% of my overall earnings?

Thanks in advance.


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## Sarenco (30 Apr 2017)

You can get tax relief on contributions up to 20% of your gross salary or €115k, whichever is lower, in each relevant year.

Edit: Sorry, I've just realised that you have income from two sources - public and private sector - is that correct?


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## arbitron (30 Apr 2017)

Yes, I have 2 incomes, 1 public service and 1 private sector.  Total gross is €120k which puts me beyond the relief limit and so I calculate that the maximum relief I can get is €23k per annum (20% of €115k).

I'm wondering if my public pension deduction of €210 pcm counts towards the €23k?  Or could I increase to €1916 pcm from my private income to my private pension?


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## Sarenco (30 Apr 2017)

arbitron said:


> Yes, I have 2 incomes, 1 public service and 1 private sector.  Total gross is €120k which puts me beyond the relief limit and so I calculate that the maximum relief I can get is €23k per annum (20% of €115k).



I think you may have to take specialist tax advice on this one.  

I know Revenue has certain "dual income" rules when it comes to relievable pension contributions (largely directed at hospital consultants with private practices) but I'm not sure how they would be applied in your circumstances.


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## arbitron (30 Apr 2017)

I agree, I'm seeing a financial advisor in a couple of weeks who will go through it with me, but just trying to get my head around as much of it as possible before meeting.


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## Protocol (30 Apr 2017)

PS pension conts do count towards the Revenue limits on tax relief.


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## Gordon Gekko (1 May 2017)

Protocol said:


> PS pension conts do count towards the Revenue limits on tax relief.



Eh, yes they do!


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## Protocol (1 May 2017)

That's what I stated.


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## Gordon Gekko (1 May 2017)

Protocol said:


> That's what I stated.



Yes, but I'm illiterate.


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## jjm (1 May 2017)

It is called being Economical with the ??????, Have a nice Bank Holiday.


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## Steven Barrett (4 May 2017)

Sarenco said:


> I think you may have to take specialist tax advice on this one.
> 
> I know Revenue has certain "dual income" rules when it comes to relievable pension contributions (largely directed at hospital consultants with private practices) but I'm not sure how they would be applied in your circumstances.



It applies to everyone. 

You have to maximise the tax relief available under the pension scheme you joined first. If there is any scope for contributions to the second scheme after that, he can use up the remainder of the relief in scheme two. 

The pension levy that they PS pay does not count as part of the pension caps on pension contributions. It's just the 6.5% of salary that is paid as contributions and widows & orphans. 


Steven
www.bluewaterfp.ie


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## Sarenco (4 May 2017)

SBarrett said:


> You have to maximise the tax relief available under the pension scheme you joined first.



As a matter of curiosity, would that include AVCs?


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## Steven Barrett (4 May 2017)

Yes, any additional contributions over the normal scheme contribution is always an AVC.


Steven 
www.bluewaterfp.ie


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## Sarenco (4 May 2017)

Understood Steven but would that effectively mean the OP would have to make the maximum public sector AVCs before contributing to the private sector occcupational pension (assuming the public sector scheme was joined first)?


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## Steven Barrett (4 May 2017)

That's it exactly.


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## arbitron (9 May 2017)

Hi SBarrett, are you sure that's correct re: having to maximise the AVCs in public service pension first?  I couldn't find anything about it on Revenue or other pension related websites.  I asked a friend who is QFA but he hasn't heard of it.


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## Steven Barrett (11 May 2017)

Yes, I'm positive. You have to maximise the tax relief available under the pension scheme that you joined first. 

file:///C:/Users/steve/Downloads/chapter-26.pdf



Steven 
www.bluewaterfp.ie


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## arbitron (11 May 2017)

I've read Chapter 26 a few times now and I can't see where it says that.

In Example 1 (below) it seems to say that Mary can makes contributions to both without reference to which came first.  Is there a different rule for HSE?

Example 1
Mary has earnings from employment of €100,000 in 2012. She also has self employed income of €100,000. She is aged 28 and is required to make a contribution of 10% of salary (i.e. €10,000) to an occupational pension scheme established by her employer. (Given Mary’s age, the maximum allowable tax relievable contribution she can make in respect of her employment earnings is a contribution of 15% of her salary i.e. €15,000). What is Mary’s scope for making further tax relievable pension contributions? As Mary is already making pension contributions in respect of her employment earnings of €100,000, she has, in effect, “used up” €100,000 of the aggregate earnings limit of €115,000. Clearly, she has not fully used her capacity to make tax relievable pension contributions in respect of her employment earnings and she could check with her scheme administrator/pension advisor to see if she has scope to secure extra benefits through AVCs. If such scope exists, she could make tax relievable AVCs of up to an additional 5% of her employment earnings (i.e. up to €5,000). In relation to her self-employed income, because Mary has “used up” €100,000 of the aggregate earnings limit of €115,000 in contributing to her occupational pension scheme, her capacity to make tax relievable contributions to a personal pension plan in respect of her self-employed earnings is restricted to a maximum of 15% of €15,000 (i.e. €2,250). This is the position irrespective of whether Mary decides to make an AVC or not.


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## Steven Barrett (11 May 2017)

arbitron said:


> I've read Chapter 26 a few times now and I can't see where it says that.
> 
> In Example 1 (below) it seems to say that Mary can makes contributions to both without reference to which came first.  Is there a different rule for HSE?
> 
> ...



The effect of this is Mary has to maximum the tax relief under this employment.

The Revenue issued an eBrief about 7/8 years ago about it. 


Steven
www.bluewaterfp.ie


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## Sarenco (11 May 2017)

Is this the ebrief you had in mind Steven?
[broken link removed]

I'm not doubting your advice for a second but it's not immediately obvious to me that this ebrief addresses a situation where somebody is contributing to two occupational schemes.


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## arbitron (11 May 2017)

Mary has income A of €100,000 plus income B of €100,000 = total gross income of €200,000. So the maximum she can contribute with tax relief is 15% of €115,000, i.e. €12,250.  She puts €10,000 i.e. 10% of income A into pension, so she hasn't maximised it for that employment or even for her aggregate income.

It then says:
"In relation to her self-employed income, because Mary has “used up” €100,000 of the aggregate earnings limit of €115,000 in contributing to her occupational pension scheme, her capacity to make tax relievable contributions to a personal pension plan in respect of her self-employed earnings is restricted to a maximum of 15% of €15,000 (i.e. €2,250)."

So I read it that she can top up the remainder of her €15,000 allowance with €2,250 from income B.

All of the revenue doctor examples refer to GMS income, which does seem to be treated differently, but GMS is just for GPs and doesn't apply to hospital doctors.


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## Steven Barrett (15 May 2017)

Sarenco said:


> Is this the ebrief you had in mind Steven?
> [broken link removed]
> 
> I'm not doubting your advice for a second but it's not immediately obvious to me that this ebrief addresses a situation where somebody is contributing to two occupational schemes.



There was one for hospital consultants as well, which said that if they are to make top-ups to their pension, it has to be an AVC to max out their tax relief under that scheme first and then they could make personal pension top ups. With the limit on earnings at €115,000, this effectively meant it would only be AVC's.

The effect is the same whether it is personal pension plan or an occupational pension plan, as in this case. 


Steven 
www.bluewaterfp.ie


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