EMPLOYER PENSION CONTRIBUTIONS IN IRELAND

In Ireland, Employer Pension Contributions are payments made into an employee’s pension scheme by their employer.

As an employee, it is important to know what exactly these contributions are and how they work.

In Ireland, employers are required to have pension schemes. However, when they don’t have one, they can allow staff to contribute to their own Personal Retirement Savings Accounts (PRSA tax relief). 

How do companies benefit from employee pension schemes?

Employers can get Tax Relief on contributions they make to employees’ pensions. If as an employer you contribute to a group pension, you can save money on taxes.

Indeed, the contributions that you make for your staff could be fully deductible for corporation tax relief.

Are you an employer who is thinking about making a group pension available to your staff? If you contribute on behalf of your staff, these contributions could be fully deductible for corporation tax relief.

So not only do you make your company pension contribution scheme more attractive by offering a pension to your employees, but you also reduce your company’s overall tax liability.

How employees can benefit from employer Pension contributions in Ireland?

If you are part of an employee pension scheme, your employer’s pension contributions aren’t counted towards your own PRSA tax relief in Ireland.

This means that John, 42, can contribute up to 25% of his salary to his pension. He makes a monthly contribution of 10%, and his employer makes a contribution of 10%.

Because his employer’s contribution doesn’t count towards his PRSA tax relief, John can still make an AVC contribution once a year of 15% of his salary, and get the maximum benefit of his Tax Relief.

John’s Salary

€55,000

John’s PRSA Tax Relief

25%

John’s Maximum Contribution p/a

€13,750

John’s Employee & Employer Pension Contributions

%

Value (€)

Net Cost to John

John’s Contribution

10%

€5,500

€3,300

Employer PENSION Contribution

10%

€5,500

€0

Total Contributions

20%

€11,000

€3,300

Due to John’s PRSA tax relief, at the higher marginal rate of 40%, his total contributions of €11,000 only cost him €3,300 Net.

If John adds an AVC of 15%, or €8,250

%

Value (€)

Net Cost to John

John’s Contribution

10%

€5,500

€3,300

Employer Pension Contribution

10%

€5,500

€0

John’s AVC

15%

€8,250

€4,950

Total Contributions

35%

€19,250

€8,250

With an AVC, John’s contributions are maximised for PRSA tax relief. He can contribute €19,250 per year, between his personal contributions, employer tax contributions, and his Additional Voluntary Contributions. This will cost him €8,250 Net.

Is an employer’s contribution a Benefit In Kind?

In Ireland, Employer Pension Contributions are not considered benefits in kind to you. If your employer makes a pension contribution to their pension plan for you, this is not considered a Benefit in Kind to you. This means that you aren’t taxed on this contribution.

Can an employer contribute to a PRSA?

If you’ve got a PRSA, owned by you personally, your employer might contribute for you. This is a Benefit in Kind. However, you won’t be taxed on this unless your total personal and employer tax contributions are above your PRSA Tax Relief Limit. If your limit is 25%, you can contribute 15% and your employer can contribute 10%, and this benefit won’t be taxable.

How do I start a pension?

  • The earlier you start contributing to your pension the better. If your company gives you the option to join a company pension contribution scheme, take the opportunity. Your employer tax contribution documents will show you exactly how much you can contribute, and how much your employer will contribute.
  • If your workplace doesn’t offer an employer pension plan, you can set up your own PRSA (Personal Retirement Savings Account) and make your own contributions through your payroll. Your employer is obliged to give you access to at least one Standard PRSA. You will also receive PRSA tax relief at source on your contribution through your payroll. Learn more about them here.
  • If you’re an employer, and you’re wondering whether to offer access to PRSAs, or to set up a company pension contribution scheme in Ireland, don’t forget about your own pension provision. Giving your employees access to a pension plan is a tax-efficient way to offer a benefit to your staff, and an opportunity to look after your own pension at the same time.

What we can do for you:

Employees:

If you’re an employee with questions about how to deal with your company pension, don’t hesitate to get in touch with us. We can help you get the best from your company’s pension. Our financial advisors will look at your options, review your scheme, and help with AVC decisions.

Are you in a job where there’s no company pension contribution scheme? We will assess your situation and find the best pension plan for you.

Get in touch with us, we’ll help you work out what you can afford, and give you advice on PRSA tax relief. We’ll even answer your employer’s questions and help them too.

Employers: 

Are you an employer thinking about the best pension options for you and your employees? How employees can benefit from Employer Pension contributions in Ireland? Greenway’s Business Advisors and Financial Advisors can help you with your company pension contribution plan in Ireland.

Call 01 853 2727 to arrange a consultation with one of our advisors.

Greenway Financial Advisors Limited is regulated by the Central Bank of Ireland. Registered No. C168372

Debbie Cheevers

Debbie Cheevers

Qualified Financial Advisor

Debbie was born in Dublin and graduated from NCAD with a degree in Visual Communication. She brings a strong customer services background to Greenway.

Debbie qualified as APA in 2017 and a fully qualified financial advisor (QFA) in 2018.

She believes that product knowledge is key to helping customers make the right choices.

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