What relief is available for pension contributions?
As an employee, you are entitled to a tax deduction for ordinary annual contributions you make to a Revenue-approved pension scheme. Your employer must deduct PAYE/PRSI from your earnings after ordinary annual contributions.
You can also get a deduction for a special contribution (generally known as an additional voluntary contribution or AVC) you make to the scheme in excess of your ordinary annual contribution.
To be approved, a scheme must provide for the payment to you of a pension when you reach normal retirement age. This is not usually before 60 years of age. PAYE is then deducted from the pension as it is paid to you.
The maximum deduction in any tax year is limited to a percentage of your remuneration from the employment, i.e., your total earnings including taxable expense allowances, taxable benefit in kind, taxable share options, but not a taxable termination payment:
aged under 30: 15% of earnings.
aged 30-39: 20% of earnings.
aged 40-49: 25% of earnings.
aged 50-55: 30% of earnings.
aged 55-60: 35% of earnings.
aged 60 or over: 40% of earnings.
If your contributions exceed the percentage limit, the excess is carried forward to be relieved against earnings in the next tax year up to the percentage limit in that year. This continues until the contributions are fully relieved, or your employment terminates, whichever comes first.