When it comes to receiving tax relief on pensions, the process, and amount, depends on the type of pension you are contributing towards, be that an occupational, public service or personal pension scheme.
With an occupational or public services pension scheme, then your employer will take the amount of your pension contribution directly from your pay before they deduct tax (with pensions in Ireland,Health Levy contributions are not affected). This means that whichever tax bracket you may fall into with your salary, you will still receive the full tax relief.
When it comes to a personal pension, because you pay Income Tax on your earnings before making any pensions contributions, you are entitled to claim tax back from the government. The percentage of tax relief that you are entitled to claim back is determined by your age, although the maximum amount that you can receive in tax relief has limits which are set down by the government, the percentages are in reference to your Net Relevant Earnings.
The older the contributor, the higher the percentage of possible tax relief, percentages range from 15% tax relief on Net Relevant Earnings for people up to the age of 30, rising to a maximum of 40% tax relief on Net Relevant Earnings for the over 60's.
However, there is a maximum limit to the amount of Net Relevant Earnings that are eligible to receive tax relief; for 2009, this figure is currently set at '150,000. So if you are currently earning more than '150,000 any additional income above that threshold will not be subject to any tax relief.
Regarding other taxation issues surrounding pensions, there are a couple of additional points to make. Firstly, once you have contributed to your pension, as the pension begins to increase in value, none of the growth of your investment fund will subsequently be subject to tax. Secondly, at the point at which you receive your pension, you will be able to receive 25% of the total pension as a lump-sum, which will be exempt from tax.
About the Author:
Rochelle Martinez, Freelance Web Content Article Writer for three years. Some of her articles are about http://www.quinn-life.com
