Another Pension Question

I have a Defined Contribution Pension (c €17,000) through an employer I left over 12 months ago. I now have a def benefit scheme with my current employer.

I have an additional non paye income of about €5k pa and want to put about €2k of this into a oension per year to reduce tax liability.

What is the best way of going about this?

If it's entirely separate income from your PAYE employment, you can treat it like a different job altogether and start a Personal Pension or PRSA in respect of these earnings only. Depending on your age, you will only be able to claim tax relief on 15%, 20%, 25% or 30% of the €5,000 income.

Or you could choose to make an Additional Voluntary Contribution (AVC) or AVC PRSA to your Occupational Pension Scheme, using this money. Limits of the scheme will apply here, which will have no reference to the secondary income.
There may be some restrictions if your main PAYE salary is €254,000 or greater and your benefits are up to the maximum. But if that's the case, you're in a comfortable position already.

Liam D Ferguson
www.prsacentre.com

Hi Liam

If this additional non paye income is "unearned" income i.e rental income, I though that this could not be used for pension contruibitions ?

Could be totaly wrong here, just something i heard.

You're right - investment income or income from property - "unearned" income is not assessable for pension purposes although I suppose you could incraese your contribution to the pension scheme and spend the unearned income instead, if you know what I mean.

I presumed from the question that badgambler was referring to earned income, but on reading it again, there's no reason to assume this. Thanks for pointing that out.

I have a question about this "unearned" income - I have Share Options through my company and because the option scheme is not revenue approved if I exercise and sell the shares I have to pay 42% income tax on any gain. Is this considered unearned income and therefore not assessable for pension purposes? (last year when I got my tax notice of assessment from the tax office this options income appears under the "assessements to Income tax" section of the form)

Your income must be taxable under Schedule D (Case 1 or 2) or Schedule E. Check with your HR department as to whether this applies to your Share Options.

It's earned income, I want to reduce my tax liability as much as possible