Starting from Scratch

Reyman

ircoha wrote:

<So if you put money into your pension that's already taxed then they tax you twice on it >

money put into a registered pension scheme is NOT taxed, this is the whole point of the deferred tax argument so it is incorrect to say it is taxed twice

Really what I'm saying is that if you put €20,000 into equities and over 10 years it gains 25% = €5,000. You are taxed only on the €5,000 when you withdraw the money @ 20% (CGT) = €1,000 tax. Property capital appreciation works the same - you are taxed on the growth.

If you put €20,000 of your after tax income into a pension (ignoring the limited tax relief on a percentage of your income) and it gains €5,000. You are taxed on the whole €25,000 when you try to withdraw it in the form of a pension.
In this sense they are taxing you twice on the original €20,000. Quite a strange inequitable system really!

ircoha

Reyman wrote:

Really what I'm saying is that if you put €20,000 into equities and over 10 years it gains 25% = €5,000. You are taxed only on the €5,000 when you withdraw the money @ 20% (CGT) = €1,000 tax. Property capital appreciation works the same - you are taxed on the growth.

If you put €20,000 of your after tax income into a pension (ignoring the limited tax relief on a percentage of your income) and it gains €5,000. You are taxed on the whole €25,000 when you try to withdraw it in the form of a pension.
In this sense they are taxing you twice on the original €20,000. Quite a strange inequitable system really!

Very fair comment indeed.
Of course the dividend or rental income respectively would also be taxed on an annual basis but I dont mean to detract from your interesting observation

Blackjack

If you are taxed on the income from your pension, is it not subject to the same tax rates as current?.

For example, if when you retire, your pension gives you an annual income of 17k, you are below within the individual Tax Free allowance, so won't be taxed on this?.

If the above is the case, then pumping a bit of cash in now which only costs you 58 cents to the Euro, and gaining an income from it that potentially is taxed at a lower rate (and this is likely as your pension is less likely to pay you anything close to your current earnings) is not a bad idea.

If you are currently paying the higher rate and eventually have annual pension returns taxed at the lower rate, then you are still saving. Particularly when you are currently only contributing 58%. If you are taxed at 42% later, then that's a bummer.

Reyman

Blackjack wrote:

If you are taxed on the income from your pension, is it not subject to the same tax rates as current?.

For example, if when you retire, your pension gives you an annual income of 17k, you are below within the individual Tax Free allowance, so won't be taxed on this?.

If the above is the case, then pumping a bit of cash in now which only costs you 58 cents to the Euro, and gaining an income from it that potentially is taxed at a lower rate (and this is likely as your pension is less likely to pay you anything close to your current earnings) is not a bad idea.

If you are currently paying the higher rate and eventually have annual pension returns taxed at the lower rate, then you are still saving. Particularly when you are currently only contributing 58%. If you are taxed at 42% later, then that's a bummer.

Quite correct - if you're on the high tax rate a pension contribution is a very good idea at present.

I've a feeling the Government is going to change this advantage enjoyed by higher rate taxpayers very soon.

So act while you can!