pay rise or employer pension contribition?

T

tobo

Guest
I am presently negotiating a pay rise. My employer is suggesting he makes contributions to my PRSA (not yet set up). My query is whether I would be better off receiving the raise and paying it into my PRSA and thereby get the 42% tax & PRSI relief, rather than my employer paying it in. I don't suppose I would get the tax/prsi benefit from my employer contributions....or would I?
 
As things stand you would be better off contributing to your employer's PRSA rather than going it alone.

You will get PAYE relief at the top rate of tax no matter what you do. But you will only get PRSI relief by contributing to your employer's PRSA. The government is working on ways of granting PRSI relief to people to go it alone but according to , the rules are not yet in place.

It's also worth remembering that your employer gets full PRSI relief on all PRSA contributions, both the ones you make and the ones s/he makes. So if a big chunk of your pay rise is going to be a PRSA contribution, your emplyer can afford to be a lot more generous than if the money was going into your paypacket.
 
pay rise or Prsa

I may have confused you. My employer does not have any pension scheme (including PRSA). He is indicating that if I set up my own PRSA that he will make contributions into it. He did arrange for someone from AIB/Ark Life to speak to staff but only one person took out a PRSA with them. I want to take out an Irish Life PRSA through LA Brokers. What I cannot understand is whether I will get PAYE relief on any amounts paid into the policy by my employer. If I don't then I presume that I am better off getting the pay rise and paying it into the prsa myself.

I hope I have made myself clearer and thanks for your help so far.
 
PRSA contribution

Hi Tobo

If your employer contributes to your PRSA, this is treated as BIK in your hands.The BIK on prsa contributions is not subject to PRSI or health levy.

You then receive a full allowance for the contribution as if it were paid in by yourself.

The net tax effect of these two is zero. No tax payable by either you or your employer.

If I were in your position I would opt for the pay increase rather than the employer "pension contriution".
Its always good to have the highest possible earnings shown on your p35 whther you are applying foir a loan or mortgage or whatever or even in the event of statutory redundancy. It also gives you the option at a later date to do something else with the pay rise other than just pay it to a pension.

Does this help ?
 
PRSA or rise

Thanks for your contribution. The fog has lifted somewhat and my efforts will now be aimed at getting the best possible rise!
 
Re: PRSA or rise

A €1000 contribution to your pension scheme costs your employer €1000, whereas a €1000 salary increase costs him €1107.50 due to employers' PRSI. You could go for a pension scheme and split the savings in PRSI with him

Brendan
 
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