L
LemonTree
Guest
Hi,
I have a query in relation to the maths of pensions.Assume an income of 100k in 2006, a world of no tax credits and a tax rate of 20% up to 64k and 42% on the rest. He decides to pay no pension.
Income =100k
Pension = 0
Total taxable = 100k
64K taxable @ 20% = 12800
rest taxable @ 42% = 15120
Total tax = 27920
Net Pay = 72080
Assume now he decides in November 07 to pay 20k into a pension.In order to get this 20k he declares a salary of 40k in November 07, such that approximately 20k go to PAYE and PRSI and 20k is Net pay. He then uses this 20k to put it into a pension.
Income=100k
Pension=20k
Total taxable=80k
64K taxable @ 20% = 12800
rest taxable @ 42% = 6720
Total tax = 19520
Net Pay = 80480
This means that the guy is only 8400 better off after paying an additional 20k to the revenue for the perceived benefit of 20,000 into a pension fund that he/she can only touch when they are 65.
Am I missing something here?
Kind regards,
Paul
I have a query in relation to the maths of pensions.Assume an income of 100k in 2006, a world of no tax credits and a tax rate of 20% up to 64k and 42% on the rest. He decides to pay no pension.
Income =100k
Pension = 0
Total taxable = 100k
64K taxable @ 20% = 12800
rest taxable @ 42% = 15120
Total tax = 27920
Net Pay = 72080
Assume now he decides in November 07 to pay 20k into a pension.In order to get this 20k he declares a salary of 40k in November 07, such that approximately 20k go to PAYE and PRSI and 20k is Net pay. He then uses this 20k to put it into a pension.
Income=100k
Pension=20k
Total taxable=80k
64K taxable @ 20% = 12800
rest taxable @ 42% = 6720
Total tax = 19520
Net Pay = 80480
This means that the guy is only 8400 better off after paying an additional 20k to the revenue for the perceived benefit of 20,000 into a pension fund that he/she can only touch when they are 65.
Am I missing something here?
Kind regards,
Paul