# Lump Sum Payment to Pension?



## StjohnDelahunty (29 May 2019)

1st post so go easy on me!

I have just returned from living abroad where I was able to save a decent amount of money.

I would like to use this money to provide for myself & my family in old age. I can place in a pension product or invest, I guess.

I have looked at the main irish pension providers, funds and costs. On my reading of the main products, placing the funds as a lumpsum into an Irish pension fund doesnt seem very sensible because the income tax relief is (understandably) limited in any one year. If you don't benefit from the income tax break on the full lumpsum the various charges and management fees in the pension products seem just too high. They really are exorbitant.

(Theres a broader public policy issue here of the revenue de facto subsidising really bad pension products that wouldn't survive without the tax break)

I'll get professional advice. But am I missing something? Should I put in the bank and drip-feed an amount annually into a pension. Or just invest elsewhere and leave there to pay the cgt on a final amount?

Thanks for reading.


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## Allpartied (29 May 2019)

StjohnDelahunty said:


> 1st post so go easy on me!
> 
> I have just returned from living abroad where I was able to save a decent amount of money.
> 
> ...



Hi, welcome to the website. You may need to provide a bit more detail. 

How old are you? 

What is your annual gross salary? 

While you are right that the pension funds are, sometimes, poor value, the tax break is very advantageous.  So, if you are in the 40% tax bracket and you have cash to spare, it is always advisable to use the pension funds to make sure you maximise your tax free lump sum upon retirement. 
However, remember that any money you put into a pension scheme is locked in until you retire.


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## StjohnDelahunty (29 May 2019)

Thanks
46 years old. Im in the 40% tax bracket now in ireland. 
Im happy to leave it all there until I retire. 
Great website by the way.


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## Zebedee (30 May 2019)

You should get relief up to 25pc of your salary (salary max €115k). You can carry forward unused relief into next year.


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## Allpartied (30 May 2019)

StjohnDelahunty said:


> Thanks
> 46 years old. Im in the 40% tax bracket now in ireland.
> Im happy to leave it all there until I retire.
> Great website by the way.



As Zebedee says, 25% of your gross salary can be placed in a pension product in the 40-49 age bracket.  Once you get to 50 this increases to 30%.  The 25% includes any pension related deductions which come out of your paid salary. This will apply if you work for a company who enroll you in a company pension or the public sector. So you will have to reduce your contribution by this amount to avoid breaking revenue rules.  The pension company will work it out for you, if you show them a payslip. 
If you don't need this money until you retire then it would make sense to drip feed it each year into the pension pot and avail of the 40% tax relief. 
There is no way of avoiding the fees that these companies charge, even if you opt for  a risk free cash fund, they still cream off a chunk for "administration".


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## Sarenco (30 May 2019)

Zebedee said:


> You can carry forward unused relief into next year.


I'm afraid that's not correct - it's a "use it or lose it" relief.


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## Ciru75 (30 May 2019)

You can carry forward unrelieved contributions to the next year and get relief for them that year. I assume that's what Zebedee meant.


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## Sarenco (30 May 2019)

Ciru75 said:


> You can carry forward unrelieved contributions to the next year and get relief


Eh, no you can’t.

There is no facility to carry forward unrelieved contributions.  

Relief must be claimed by the appropriate cut off point or it’s gone forevever.


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## Coldwarrior (31 May 2019)

Sarenco said:


> Eh, no you can’t.
> 
> There is no facility to carry forward unrelieved contributions.
> 
> Relief must be claimed by the appropriate cut off point or it’s gone forevever.



Think they mean that if you had for example paid 5% in pension contributions in 2018 through payroll, you could pay an additional lump sum in 2019 to max out your 2018 contributions (another 15% etc depending on your age) when filing your 2018 tax return.


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## Sarenco (31 May 2019)

Coldwarrior said:


> Think they mean that if you had for example paid 5% in pension contributions in 2018 through payroll, you could pay an additional lump sum in 2019 to max out your 2018 contributions (another 15% etc depending on your age) when filling your 2018 tax return.


Ah, I see.

Yes, pension contributions in respect of a particular year can certainly be made at any time up to the tax filing deadline for that year.  So, pension contributions for 2018 can be made at any time up to 31 October 2019 (or mid-November if filing online).


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## thos (31 May 2019)

Regardless of tax relief paying into the pension, you're getting tax free growth once it's in there. No DIRT, no CGT, no settlement every 8-years. If the money is destined for pension use anyway, it's worth keeping this in mind.


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## abc_xyz (31 May 2019)

Sarenco said:


> Eh, no you can’t.
> 
> There is no facility to carry forward unrelieved contributions.
> 
> Relief must be claimed by the appropriate cut off point or it’s gone forevever.



Are you of this? I've read otherwise on here multiple times.
Eg.





						Contributing AVCs when retired
					

Hi, When I retire, I expect to have surplus cash every month from my state pension and defined benefit pension. I will also have an ARF (from current AVC contribution) which I don’t intend to draw from (ideally). Can I use this surplus cash to contribute to AVCs? If yes, do this AVCs go straight...



					www.askaboutmoney.com
				








						Where to invest monthly
					

Hi, currently trying to figure out what makes the most sense to invest a monthly amount of €1500 in.  I am already paying the max into my pension for my age, in addition, we have our mortgage down to 1 times our income (2.3% fixed) and making large overpayments (im not going to make higher...



					www.askaboutmoney.com
				




Eg. you can contribute 20k in 2018 and claim some for 2018 tax year (by Oct/2019) and claim some for 2019 tax year (by Oct/2020), within age related percentage limits.


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## Sarenco (31 May 2019)

abc_xyz said:


> Eg. you can contribute 20k in 2018 and claim some for 2018 tax year (by Oct/2019) and claim some for 2019 tax year (by Oct/2020), within age related percentage limits.


That scenario doesn't involve carrying forward any unused relief.


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## abc_xyz (31 May 2019)

Sarenco said:


> There is no facility to carry forward unrelieved contributions.





Sarenco said:


> That scenario doesn't involve carrying forward any unused relief.



Sorry, I'm confused now. What do you mean by "unrelieved contributions"? I thought it was as per my example/the two links.


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## Sarenco (31 May 2019)

Poor choice of words on my part - I meant unused relief.

In your example, you are just claiming relief in two different time periods - you aren't carrying forward any unused relief from an earlier period.


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## Conan (31 May 2019)

Simple example.
Earnings €100,000
Age contribution limit 20%
You invest €60,000 in June 2019
So for tax relief you can claim:
€20,000 in 2018 (when making tax return) assuming no other pension contribution 
€20,000 in 2019
€20,000 in 2020 assuming earnings still €100,000
So in that sense any unused relief can be carried forward.


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## Sarenco (31 May 2019)

Conan said:


> So in that sense any unused relief can be carried forward.


Maybe I'm just being pedantic but I don't see how any unused relief is being carried forward in that scenario.

Surely, in your example, you are just maximising 2018 relief, 2019 relief, etc.  No?


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## Gordon Gekko (31 May 2019)

If I’m 38 and earn €115k, I’m allowed relief on €23k of pension contribution per year.

There is nothing stopping me contributing €500k today and claiming the relief each year.

It’s carried forward in the tax return.

I’d need to be sure of the future income mind.


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