As we are fast approaching the Revenue “Pay and File” deadline, you have the opportunity to make a pension contribution to reduce your income tax liability and to potentially grow your retirement pension pot. Based on our experience with clients, many people tend to view the deadline as simply an opportunity to reduce their income tax bill. This may be true, but it is equally important to consider how your current and historic pension contributions are invested.
So How Should You Prepare?
Making simple choices today can help you plan for the level of income you will need and the life you want in retirement. We are all living longer and need to ensure that we start to plan and invest early on in order to meet the financial challenge of longevity. It’s a good idea to seek advice from a financial advisor to guide you through the process and help you select the right pension plan for your circumstance. You should be looking at any debt you are seeking to clear and any plans you already have in place for your retirement, along with other assets you have and a review of your savings plan. As part of any investment strategy, a financial advisor should work with you to determine investment goals, identify attitude to risk and define an appropriate investment term.
Make Sure You Are Matched to the Correct Pension Arrangement
From a pension perspective the Revenue Commissioners recognise two types of tax payer:
- Schedule E – all PAYE employees
- Schedule D, Case I or II – all self-employed individuals whose profits arise from carrying out a trade or a profession.
Your tax status will dictate the type of pension to which you can contribute:
- Personal Pension or PRSA (Personal Retirement Savings Account): where you are an employee with Schedule E income during 2017 but not a member of your employer’s company pension scheme.
- AVC (Additional Voluntary Contribution) or PRSA AVC: where you are an employee with Schedule E income during 2017, a member of your employer’s company pension scheme during 2017 and still in that same employment.
- Personal Pension or PRSA: where you are self-employed
Income Tax Relief on Contributions
Income tax relief is still available on contributions made personally to a personal pension plan, PRSA or employee/AVC contributions to an occupational pension scheme. Income tax relief is available on up to 40% of the contribution for a top rate tax payer, or 20% for a standard rate tax payer. Those who both pay and file their tax returns through the Revenue Online Service (ROS) have until Tuesday, 14th November 2018 to pay a pension contribution and elect to backdate the income tax relief against the 2017 tax year. Those who do not qualify for the ROS extension must do this by 31st October 2018.
Maximum Pension Contributions Allowed
The following table sets out the maximum allowable tax relief limits for pension contributions based on increasing age bands:
|Age||% of Net Relevant Earnings|
|Up to 29||15%|
|30 – 39||20%|
|40 – 49||25%|
|50 – 54||30%|
|55 – 59||35%|
Source: The Pensions Authority www.PensionsAuthority.ie
Start Your Pension Today
Cantor Fitzgerald can work with you to review your pension arrangements and formulate a cohesive retirement and investment strategy. We provide personalised tax approved pension structures that offer you investment flexibility, control and transparency. To speak with a Portfolio Manager or Account Executive, please phone the Cantor Fitzgerald dealing desk on 01 633 3633.
Warning: If you invest in a pension, you will not have access to your money until you retire. The value of your investment may go down as well as up. If you invest in a pension you may lose some or all of the money you invest.