Which pension to add lump sum?

[TBFrank]

Hello - I'm afraid I'm not well informed about pensions and hope to get a steer on best course of action in following situation.

Background is I'm 62, I took redundancy 8 years ago from employment where I had accumulated a pension fund of circa 200k. I haven't touched that fund since - it remains there. I worked 6 month part time in a 3rd level DCU and started a new pension there but the fund is worth next to nothing. I then worked last 8 years as self employed and did not contribute to any pension. I recently have taken up salaried employment again and will be starting a pension with a 5% employer contribution.

I am considering putting a lump of maybe 30k or 40k into a pension fund assuming I can significantly reduce this year's tax bill. My gross earnings may be in the region of 60 or 70k by end of year.

My two questions would be:
- will I get full relief for 30 or 40k lump sum put into pension now (or where can I go to confirm that)?
- is there any reason I should choose one pension scheme over the other when it comes to adding a lump sum? Is there any benefit for putting it into the new one - e.g to increase whatever lump sum i can get at retirement? (assuming my new employment pension scheme that I'm starting to contribute to performs the same as my older one with the 200k sitting in it)
-

 

[ClubMan]

I am considering putting a lump of maybe 30k or 40k into a pension fund assuming I can significantly reduce this year's tax bill. My gross earnings may be in the region of 60 or 70k by end of year.

At your age you can contribute up to 40% of your gross to a pension and claim full tax relief on it.

Tax relief limits on pension contributions

This page outlines the tax relief limits on pension contributions

www.revenue.ie

So if your gross for 2024 is €70K then that's €28K.

I think that you may be too late for backdating a contribution to last year to take advantage of any unused relief for 2023 unless you are allowed to do this before the extended self-assessment deadline of 14th November 2024. I'm constantly confused on whether or not this date or the 31st October applies to PAYE workers making pension topups - sorry . But if that IS possible then you need to get your skates on to make thecontribution and make the claim for backdated relief.

Another option is to exceed your 40% limit for this year but claim the relief on the excess against earnings next year.

My two questions would be:
- will I get full relief for 30 or 40k lump sum put into pension now (or where can I go to confirm that)?

See above.

- is there any reason I should choose one pension scheme over the other when it comes to adding a lump sum? Is there any benefit for putting it into the new one - e.g to increase whatever lump sum i can get at retirement? (assuming my new employment pension scheme that I'm starting to contribute to performs the same as my older one with the 200k sitting in it)

I would think that it's better to contribute to the pension with the lower charges.
What charges apply to the two pensions?
(I'm assuming that the fund selection/asset allocation in both pensions are appropriate).

 

[ClubMan]

BTW - if you happen to have any debts outstanding, possibly including a mortgage, then it may make more sense to use some or all of your money to reduce/clear these before topping up the pension?

 

[S class]

You can get tax relief on 40% of your yearly earnings. So 40% of up to 70k.

If you immediately contributed 40k this year you could carry forward the excess non tax relived amount to a future year.

You can only get tax relief on contributions to a pension related to your current pensionable employment

You don't necessarily have to make the extra contributions to the scheme set up by your employer.

You are allowed to set up a separate AVC PRSA and contribute to this instead.

It is possibly a good idea not to have your employer aware that you can afford to make large extra pension contributions. If your employer is aware that you can do this it could hinder you if you are seeking a cost of living pay increase.

You employer will not have knowledge of, or access to an AVC PRSA.

 

[Persius]

You can only contribute to your current occupational pension (or an AVC PRSA as S class said above). You can't contribute to any of your previous pension schemes.