The Pensions section on the Revenue website, www.revenue.ie contains information on pension products, how tax is applied and how tax relief is granted.

Popular topics that are discussed include:

 

Taxation of retirement lump-sums

You can receive a tax free lifetime limit of €200,000 on retirement lump sums from all sources. The amount between €200,001 and €500,000 is taxable at the standard rate of tax (20%). Any amount in excess of €500,000 is taxed under Pay As You Earn (PAYE) at the marginal tax rate (40%).

Lump sum payments arising from foreign pension arrangements are taxed in the same manner. However, you must include details of the lump sum on an Income Tax Return (Form 11 or Form 12). You must pay any tax due when making your annual Income Tax payment.

Taxation of foreign pensions

In general, foreign pensions (including United Kingdom and United States pensions) are taxable sources of income in Ireland. They are liable to Income Tax and Universal Social Charge (USC), but not Pay Related Social Insurance (PRSI).

How is the tax on foreign pensions collected?

If you are a Pay As You Earn (PAYE) taxpayer, you must tell Revenue if you are receiving a foreign pension. We will reduce the annual tax credits and rate band on your Tax Credit Certificate to take account of it.

If you are self-employed, you must include details of the pension on your Income Tax Return (Form 11). You must pay the tax due when making your annual Income Tax payment.

Tax relief on pension contributions

You can get Income Tax relief against earnings from your employment for your pension contributions (including Additional Voluntary Contributions (AVCs). Pension contributions to the following pension plans may qualify for tax relief:

  • occupational pension schemes
  • Personal Retirement Savings Accounts (PRSAs)
  • Retirement Annuity Contracts (RACs)
  • Pan-European Personal Pension Products (PEPPs)
  • and
  • qualifying overseas plans.

This is subject to the limits outlined on the next page. Income Tax relief is given at your ‘marginal’ (highest) tax rate. There is no relief from Universal Social Charge (USC) or Pay Related Social Insurance (PRSI) for employee pension contributions.

Taxation of pensions

Personal pensions and occupational pensions are taxable sources of income. They are liable to Income Tax and Universal Social Charge (USC). They may also be liable to Pay Related Social Insurance (PRSI) in the same way as employment income. Your pension provider will deduct the tax from each payment it makes to you.

Pension contributions are aggregated between all pension products. You may contribute to an occupational pension scheme and a personal pension. However, tax relief is subject to the combined total of all pension contributions. Tax relief is granted according to your age-related factor and subject to the earnings threshold of €115,000.

You may need to take steps to Avoid Emergency Tax on personal pensions.

Taxation of Department of Social Protection pensions

Social welfare pensions paid by the DSP are liable to Income Tax. They are not liable to Universal Social Charge (USC) or PRSI. The DSP gives Revenue information on the taxable amount of these pensions.

Please note, the DSP do not give Revenue information regarding the following pensions:

  • Blind Pension
  • Death Benefit Pension
  • Widow’s, Widower’s or Surviving Civil Partner’s (Non-Contributory) Pension.

How the tax on social welfare pensions is collected depends on whether you are a Pay As You Earn (PAYE) taxpayer or self-employed.

If you are a PAYE taxpayer

Revenue reduces the annual tax credits and rate band on your Tax Credit Certificate (TCC) to take account of the pension.

If you are self-employed

You must include details of any social welfare payments on your Income Tax Return (Form 11). You need to pay the tax due when making your annual Income Tax payment.

Pension products

This section outlines different types of pension products and provides some details specific to each of them.

Personal pensions and occupational pensions are taxable sources of income. Pension benefits are subject to Income Tax and Universal Social Charge (USC). Some pensions will be subject to Pay Related Social Insurance (PRSI) depending on the personal circumstances of the pensioner. Your pension provider will deduct the tax from each payment it makes to you. For further information on how pensions are taxed, please see Taxation of pensions.

You can get tax relief on the contributions you pay into your pension. For further information on tax relief, please see Tax relief on pension contributions.

You should direct all queries related to pension products to your pension provider.

For more information contact McGowan Accountancy Services on  (090) 66 25818 or email nuala@mcgowanaccountancy.com