helpneeded
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I'm trying to determine if it makes sense for my father-in-law to invest in a pension (PRSA) in order to avail of tax benefits.
He's 69, and previously paid into a pension plan which he drew down all off when he was 60. Since then he's had all the proceeds of that sitting in a post office account (not sure of the tax wisdom of that at the time, but it's in the past.) He's not close to having drawn down €200k.
He now receives the state contributory pension (as does his wife). However he continues to work and receives a salary from his employer. He doesn't pay into any pension anymore. He plans to continue working for a few more years.
I'm aware that to claim tax relief upon paying into a PRSA, the source of income must be employment. So as far as I am aware, he can't use his contributory state pension to pay into the PRSA.
My question is how would revenue consider tax credits available to him and his wife? He pays enough tax (PAYE) on his total income, that he could pay in 40% of his employment salary to a PRSA and 20% of that is < than the total tax he pays (marginal rate not an issue for him)
If he didn't work and only drew the two pensions, then available tax credits would entirely cover his PAYE bill and he'd pay nothing. So if he could say that tax credits are all attributed to his pension income, he'd be paying enough tax on his salary to make setting up a PRSA for his remaining years of employment a worthwhile decision. However if revenue were to say that's incorrect and he should consider the tax credits against his salary, then he'd have minimal tax benefit and probably just lose out paying fees (as he'd only consider investing in a cash fund with minimum return as he's risk averse)
Zurich/Irish life tell me the product we want is available, but won't give any view on if the tax plan makes sense. As the reclaiming tax is the only reason to do this, I'm keen to understand before advising him to go with a PRSA!
Anyone have any insight or be able to point me to guidance!
He's 69, and previously paid into a pension plan which he drew down all off when he was 60. Since then he's had all the proceeds of that sitting in a post office account (not sure of the tax wisdom of that at the time, but it's in the past.) He's not close to having drawn down €200k.
He now receives the state contributory pension (as does his wife). However he continues to work and receives a salary from his employer. He doesn't pay into any pension anymore. He plans to continue working for a few more years.
I'm aware that to claim tax relief upon paying into a PRSA, the source of income must be employment. So as far as I am aware, he can't use his contributory state pension to pay into the PRSA.
My question is how would revenue consider tax credits available to him and his wife? He pays enough tax (PAYE) on his total income, that he could pay in 40% of his employment salary to a PRSA and 20% of that is < than the total tax he pays (marginal rate not an issue for him)
If he didn't work and only drew the two pensions, then available tax credits would entirely cover his PAYE bill and he'd pay nothing. So if he could say that tax credits are all attributed to his pension income, he'd be paying enough tax on his salary to make setting up a PRSA for his remaining years of employment a worthwhile decision. However if revenue were to say that's incorrect and he should consider the tax credits against his salary, then he'd have minimal tax benefit and probably just lose out paying fees (as he'd only consider investing in a cash fund with minimum return as he's risk averse)
Zurich/Irish life tell me the product we want is available, but won't give any view on if the tax plan makes sense. As the reclaiming tax is the only reason to do this, I'm keen to understand before advising him to go with a PRSA!
Anyone have any insight or be able to point me to guidance!