Pension tax relief - earnings limits query

Hello,

I am in the (foturnate!) position of starting work soon with a new employer who offers a very generous match on my pension contributions.

My previous employer did not offer a scheme and I had a PRSA. For that I understood at 15% of my earnings was the maximum I could claim tax relief for.

However, the new scheme appears to be an occupational scheme. Am I correct in thinking that the 15% limit (I'm under 30) applies to my own contributions? That is to say, if I contribute 10% and my employer also contrubutes 10% I will not be taxed on the extra 5% above the earnings limit?

Yep - your understanding is correct.

Is there a limit on the extent of the employer matching?

Yes there is a limit! But the total contribution (me plus employer) would be just over 15% and I was wondering if I would be stung for extra tax on the difference and, if so, would it be worth my while paying tax now for a distant pension benefit.

Thanks for clearing that up - I did a lot of research into PRSAs when I set that up and I was suprised that there is this difference. It is very unfair to PRSA holders and those without access to an occupational scheme.

Username2012 said:

I did a lot of research into PRSAs when I set that up and I was suprised that there is this difference. It is very unfair to PRSA holders and those without access to an occupational scheme.

Click to expand...

Yes, there is an anomaly in the tax treatment of PRSAs relative to occupational pension schemes. This may be removed at some future point (probably by making employer contributions to occupational schemes subject to BIK).