r/irishpersonalfinance Sep 21 '21

What age are you, and how much is in your pension(s)? Retirement

With pensions in the news, I thought this would be an interesting discussion.

I am 30, and have 1 pension that currently contains €62,399.

I currently contribute 15% and my employer contributes 6%. Come January, I will up my contribution to 20%. I would have 2 pensions, but I merged them as my current one has much lower fees. My pension is 100% in Indexed Global Equity.


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u/macmillsy Sep 21 '21

I always thought that your employers contributions counted toward your overall tax free allowance?

So if you’re 30 and get tax relief of 20%, then that would be say 10% your contribution and 10% the employers… but if I did 20% and the employer did 10% then I would lose tax relief on the employers 10%…. No?


u/PinkFart Sep 21 '21

Nope. Tax free allowance is only on your portion.


u/1483788275838 Sep 21 '21

It depends. If your pension is a PRSA then it does include employer contributions.

If yours is an occupational pension, then it's just your contributions so you can go up to 20%.


u/GuybrushThreewood Sep 21 '21

Your contributions attract tax relief i.e. your earnings for PAYE purposes are reduced by the contributions before your paye cutoff and credits are applied. So you could get 20% or 40% relief depending on your earnings. There are limits on tax relief available (age based and an overall limit).

Interestingly (okay it's not so interesting) for a PRSA employer contributions do attract tax relief for the employee, but this is cancelled out as they are also considered a taxable benefit in kind.


u/Pablo_Eskobar Sep 21 '21

Isn't it only deferred tax and you do pay it on draw down?


u/deeringc Sep 21 '21

Well, you might be earning at the higher rate of tax now and would therefore pay 40% income tax on that income. By putting it into the pension it first of all gets to grow for 40-50 years with compound growth/interest which is huge. But also, when you actually take your pension, the tax bands apply again, so you will pay no tax on the first chunk, 20% on the next chunk and only 40% above the higher rate of tax threshold (obviously those specific numbers might change by the time you retire, but the principle remains the same). The truth is that most private sector pensions are quite small in terms of what they pay out every year, so most people dont pay much or any of their pensions at the higher rate.


u/GuybrushThreewood Sep 21 '21

That depends on how you draw it down, tax free lump sum vs annuity etc. Yes annuities are taxable, but you could be getting relief at 40% and be paying tax at a less than 20% effective rate on drawdown.


u/Pablo_Eskobar Sep 21 '21

I need to really learn bout this stuff. 44 haven't started one yet but the mortgage will be clear in 8 yrs figure I'll lump that into one once its clear. Never gonna put a 100s of thousands into one at this stage but should have a nice lump sum if I make it to 66


u/funderpantz Sep 21 '21

The biggest benefit of a pension is on the compounded interest over time i.e the sooner you start the bigger the benefit to you

Waiting another 8 years puts you at 52, retiring at 66, gives you 14 years of a pension. Honestly thats going to be a tiny, tiny pension.

You would be far better off starting asap and putting in as close to 20% of your salary as humanly possible at your age, regardless of what the actual % ends up being. Basically start asap otherwise you'll be living off the govt pension which is f all