Tax back on pensions

Citizen Jake

Can anyone tell me how much tax rebate I am due back on my pension contributions and how I go about claiming it.

I've been paying into a private pension for 9 years now and only claimed on the first two/three years when filing my taxes as a self-employed person (wise accountant). But since I've been a PAYE worker for more or less the last 7 years its been one of those things I kept neglecting to get round to. However, with bills mounting up and the urgent need to boost my savings I think its high time to get it in order.

Any suggestions or know where I can get info on this?

Reyman

If you're PAYE and have an associated pension scheme, I'm pretty sure you can't get any tax relief on your private pension contributions.

If you have no PAYE pension you have to get a cert for each of the years' contributions from the pension company. You just send this with a covering letter to the Revenue Commissioners (and wait about 6 months for a refund)

By the way those pension schemes are a dreadful rip off - if you check you'll find you're paying a huge whack of your contributions to the company (the exact amount is very hard to find out). This is to pay for the senior executives' Company Mercs and Holiday Apartments down in the Agarve.

Freeze it - stop paying, and get a PRSA - much better deal. The pension companies hate them!

RainyDay

Originally posted by Reyman
By the way those pension schemes are a dreadful rip off - if you check you'll find you're paying a huge whack of your contributions to the company (the exact amount is very hard to find out). This is to pay for the senior executives' Company Mercs and Holiday Apartments down in the Agarve.

Freeze it - stop paying, and get a PRSA - much better deal.

This is an over-simplification. Many PRSA's have high charges as well. You really need to check the specific charges associated with your own scheme.

Reyman

The standard PRSA schemes have a very simple charging scheme. A one off charge of 5% of the amount invested and 1 % per annum on the total amount in the pension. This cannot be exceeded by law!

It's interesting to compare this with the non standard PRSAs or the traditional rip off pension schemes sponsored for years by the Insurance companies. You won't believe what they got away with for all those years !

Hence the Company Mercs and Apartments down in the Algarve for the Insurance company senior management!!!

RainyDay

Originally posted by Reyman
The standard PRSA schemes have a very simple charging scheme. A one off charge of 5% of the amount invested and 1 % per annum on the total amount in the pension. This cannot be exceeded by law!

It's interesting to compare this with the non standard PRSAs or the traditional rip off pension schemes sponsored for years by the Insurance companies. You won't believe what they got away with for all those years !

Again, it is an over-simplification to say that standard PRSA's are good value. A 5% entry charge is not good value for money. It is possible to beat these charges by shopping around, particularly with a nil-commission execution-only provider like LA Brokers. You really need to check out the particular charges for each particular scheme before you can draw any conclusions.

Reyman

That sounds even better ! No upfront charges !

The Insurance industry gets a chance to join the real world, though I suppose it's the Brokers who are taking the commission hit in this case!

shoegirl

PRSAs are not good value. The cap on charges is exceptionally high when you consider that these pensions are targeted at thoes on the lower income brackets who may need every penny they can get. Taking money from those who need it least should be limited more than it is.

You are entitled to claim back tax for up to 5 years. Just get receipts from the pension company and all your P60s and send them with a written letter explaining the situtuation to your local tax office. The way the tax relief works is that bsaically pension contributions are non-taxable, so you save the tax you would have paid had you just taken the cash. So if you pay 20% tax and contribute 60 per month, you save 12 euros. Over 5 years this would be a tidy sum - about 720. And if you indexed your contributions, you'll get even more . . .

Have you looked into your companies scheme? They are probably a lot better than PRSAs which are targeted at employees where there is no scheme. For example, my company pay all the charges related to my pension and match my contribution. This means that I only contribute 60 a month (saving 12 in tax, so really only 48), and my company contributes 60. This doubles my savings instantly. Also if I were paying into a PRSA they could conceivably be charging me a few euro a month up to 5% of the contribution. So I save that also. Be warned that company pension documents are hideously boring and complex and you really have to dig deep to find out whats really going on. The combination of tax savings and employers contributions and paying the charges effectively adds more than double the value to my pension.

Also be reminded that your companies pension may be a final salary scheme - you'll get a lot more out of it than a private pension. Bascially these stand alone products are very risky and can be very disappointing (my father contributed huge amounts and then the pension lost huge amounts and left him retiring on a mere 50 euro a week - this was devastating for somebody who still has a pension to pay, and has left a 61 year old man working as a security guard part time in order to make ends meet). If you company is private sector there's a good chance you may be able to transfer your existing pension into the company scheme (this is possible in my company scheme anyway).

Reyman

Mostly correct what you say. But if you're self employed , PRSA is the best of the lot around ! And the Pension companies don't like them, so they must be good!

Really we should be able to manage our own money and not pay these 'chancers' any commission but this isn't allowed by the tax laws.

Be careful in going into ecstasy over the tax relief. It's only temporary! If you get relief at 20% ---- you then most likely pay tax at 20% on the pension you receive.

So the Government is only "delaying" your tax relief. They get it from you eventually!! (Apart from the small tax free lump sum you're allowed take)

Victor

Originally posted by shoegirl
You are entitled to claim back tax for up to 5 years.

6 years, you will probably get away with the seventh.

Originally posted by Reyman
Be careful in going into ecstasy over the tax relief. It's only temporary! If you get relief at 20% ---- you then most likely pay tax at 20% on the pension you receive. So the Government is only "delaying" your tax relief. They get it from you eventually!! (Apart from the small tax free lump sum you're allowed take)

Yes, effectively you are postponing income. However, for a 42% taxpayer, this means they get to use their tax credits and the 20% band much better. Also because your growth is on a gross amount, cumulatively it adds up.