Maximum employer pension contribution?

VonLuck

Can anyone tell me what the maximum employer pension contribution is?

I'm toying with the idea at my next salary review to request an increase in the employer's contribution into my pension instead of a potential raise. I'd like to know how high it can go because I figure that I'll get a higher overall income (including pension) for the same cost to the employer.

I won't have to pay any tax on the pension increase as well as the employer not having to pay PRSI, therefore the total cost to the employer goes directly to me. I think that makes sense anyways...

coylemj

I've checked on the Revenue website and can't find the rule but I'm pretty sure that for an employer to get the tax benefits you're talking about, they have to give the same benefits to all of their employees. So what you're proposing is probably a non-starter, given that a lot (if not most) of your co-workers will want their pay increases in the payroll and not as an increased employer contribution to their pension pots.

VonLuck

Interesting. If that's the case then not much I can do. Do you know where I can find info on that? Just want to be 100% sure.

jonnybravo

coylemj wrote: »

I've checked on the Revenue website and can't find the rule but I'm pretty sure that for an employer to get the tax benefits you're talking about, they have to give the same benefits to all of their employees. So what you're proposing is probably a non-starter, given that a lot (if not most) of your co-workers will want their pay increases in the payroll and not as an increased employer contribution to their pension pots.

Not a tax expert but most companies would have different rates of employer contributions to pensions so not all benefits have to be the same for all employees. In a previous company I started on a rate of 6% but got it increased to 9% when I had been there a few years).

Same for pay increases - some employees will get them others won't.

The issue might be that the employer won't want to set a precendence for increasing an employer rate of contributions.

lulut

I usually put my rises into AVCs with our company pension so that would be an option for you also

VonLuck

jonnybravo wrote: »

Not a tax expert but most companies would have different rates of employer contributions to pensions so not all benefits have to be the same for all employees. In a previous company I started on a rate of 6% but got it increased to 9% when I had been there a few years).

Same for pay increases - some employees will get them others won't.

The issue might be that the employer won't want to set a precendence for increasing an employer rate of contributions.

I guess there's no harm in asking. Good to know that it's at least possible, even if they don't want to do it.

lulut wrote: »

I usually put my rises into AVCs with our company pension so that would be an option for you also

Yes but there's a limit beyond which you then get taxed. Just trying to maximise my payments into my pension fund without being penalised.

bilbot79

VonLuck wrote: »

I guess there's no harm in asking. Good to know that it's at least possible, even if they don't want to do it.



Yes but there's a limit beyond which you then get taxed. Just trying to maximise my payments into my pension fund without being penalised.

Does your company do contribution matching? If they do I think they can write their side off tax( not 100% sure on this) Say they match up to 6%, you contribute 25%(if you're 40), they put an extra 6% on top of say 7% they already give...that would give you contributions of total 44% at a cost to you of about 13.5% of your net salary.

Financial utopia

cruizer101

According to revenues website the limit to which you contribute without paying tax includes the employer contribution, so it really is no different to you getting a payrise and putting that money into pension.

https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx

PRSAs
Employer PRSA contributions are:
deemed for tax relief purposes to be made by the employee
added to the employee's actual contributions to determine if the above limits are reached
treated as a taxable employer benefit received by the employee.

Henry Ford III

coylemj wrote: »

I've checked on the Revenue website and can't find the rule but I'm pretty sure that for an employer to get the tax benefits you're talking about, they have to give the same benefits to all of their employees. So what you're proposing is probably a non-starter, given that a lot (if not most) of your co-workers will want their pay increases in the payroll and not as an increased employer contribution to their pension pots.

No. That's totally incorrect.

What the OP is proposing is possible. The max. contribution is an individual calculation. A decent pension specialist will have access to a max. funding test. It takes a lot of individual data into account.

Bubbaclaus

Henry Ford III wrote: »

No. That's totally incorrect.

What the OP is proposing is possible. The max. contribution is an individual calculation. A decent pension specialist will have access to a max. funding test. It takes a lot of individual data into account.

I think the poster was referring to the salary sacrifice tax legislation. It would be difficult not to see it as a salary sacrifice arrangement if all the other staff are not getting it and just getting a salary increase. Most companies wouldn't want to take the risk.

Henry Ford III

Bubbaclaus wrote: »

I think the poster was referring to the salary sacrifice tax legislation. It would be difficult not to see it as a salary sacrifice arrangement if all the other staff are not getting it and just getting a salary increase. Most companies wouldn't want to take the risk.

Employers pension contribution isn't taxable.

Salary sacrifice/pension contribution arrangements aren't rare.

bilbot79

cruizer101 wrote: »

According to revenues website the limit to which you contribute without paying tax includes the employer contribution, so it really is no different to you getting a payrise and putting that money into pension.

https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx

PRSAs
Employer PRSA contributions are:
deemed for tax relief purposes to be made by the employee
added to the employee's actual contributions to determine if the above limits are reached
treated as a taxable employer benefit received by the employee.

I think this Employer PRSA is different to an Occupational Pension Scheme no?

Henry Ford III

bilbot79 wrote: »

I think this Employer PRSA is different to an Occupational Pension Scheme no?

Yes. Quite different as regards max. contributions

100% of salary isn't impossible to get Revenue approved. Sometimes depending on age, marital status, and retained benefits it can be much higher.

VonLuck

Henry Ford III wrote: »

No. That's totally incorrect.

What the OP is proposing is possible. The max. contribution is an individual calculation. A decent pension specialist will have access to a max. funding test. It takes a lot of individual data into account.

So is there any way for me to calculate this myself or would I need to speak to someone about my options?

Henry Ford III

VonLuck wrote: »

So is there any way for me to calculate this myself or would I need to speak to someone about my options?

Yep. Get an up to date valuation on all your pension(s) benefits and ask for a maximum funding quote.

Might cost you c.€150.

bilbot79

Henry Ford III wrote: »

Yes. Quite different as regards max. contributions

100% of salary isn't impossible to get Revenue approved. Sometimes depending on age, marital status, and retained benefits it can be much higher.

I don't understand? I'm in my 40s and the max is 25% right?

Bubbaclaus

Henry Ford III wrote: »

Employers pension contribution isn't taxable.

I know. That's entirely why there is salary sacrifice considerations in the first place

Henry Ford III wrote: »

Salary sacrifice/pension contribution arrangements aren't rare.

Changing a salary increase into an employer pension contribution is salary sacrifice, and I would be very surprised if they are common given it leaves the company wide open from a tax risk perspective.

Edit: See 3.8 of the attached

Henry Ford III

bilbot79 wrote: »

I don't understand? I'm in my 40s and the max is 25% right?

That's your contribution only.

Consider a business owner making big bucks. Paying themselves say €100k. With a bit of thought and planning the Co. can pay an EPP premium of perhaps €100k p.a on behalf of the owner.

Premium is deductable against profit, is Revenue approved, and doesn't incur any tax liability on the individual.

In other words a smart and efficient way to extract funds

bilbot79

Henry Ford III wrote: »

That's your contribution only.

Consider a business owner making big bucks. Paying themselves say €100k. With a bit of thought and planning the Co. can pay an EPP premium of perhaps €100k p.a on behalf of the owner.

Premium is deductable against profit, is Revenue approved, and doesn't incur any tax liability on the individual.

In other words a smart and efficient way to extract funds

Ah I see. I don't think my employer would increase their percentage now matter how much I wanted

Henry Ford III

Bubbaclaus wrote: »

I know. That's entirely why there is salary sacrifice considerations in the first place



Changing a salary increase into an employer pension contribution is salary sacrifice, and I would be very surprised if they are common given it leaves the company wide open from a tax risk perspective.

Edit: See 3.8 of the attached

As I said it's not unusual at all. In reality it'd never be noticed.

PKB1

lulut wrote: »

I usually put my rises into AVCs with our company pension so that would be an option for you also

Yes but that isn’t as tax efficient. You only get relief at the marginal rate of tax so you have still to pay EE Prsi and USC on the amount you put into the pension. If the employer pay directly then these taxes are avoided. In addition the employer does not have to pay ER prsi on the pension contribution.

PKB1

Does anybody know how revenue could prove salary sacrifice if a person agreed with employer that a once off raise would be paid directly into the pension?

Henry Ford III

PKB1 wrote: »

Does anybody know how revenue could prove salary sacrifice if a person agreed with employer that a once off raise would be paid directly into the pension?

That wouldn't be salary sacrifice surely?

Bubbaclaus

Henry Ford III wrote: »

That wouldn't be salary sacrifice surely?

A once off raise being put into pension by employer instead absolutely would be. See my previous posts in this thread.

PKB1

Bubbaclaus wrote: »

I once off raise being put into pension by employer instead absolutely would be. See my previous posts in this thread.

Would that be the case if it was just agreed to increase a pension contribution for an employee?

Henry Ford III

Bubbaclaus wrote: »

A once off raise being put into pension by employer instead absolutely would be. See my previous posts in this thread.

Nonsense.

A one off raise isn't salary imho - it's a bonus.

Bubbaclaus

Henry Ford III wrote: »

Nonsense.

A one off raise isn't salary imho - it's a bonus.

Not sure how that changes anything. Unless you think the salary sacrifice legislation 118B TCA 1997 only applies to basic salary? Salary sacrifice is just the term for it, it doesnt mean it only applies to salary.

Henry Ford III

Bubbaclaus wrote: »

Not sure how that changes anything. Unless you think the salary sacrifice legislation 118B TCA 1997 only applies to basic salary? Salary sacrifice is just the term for it, it doesnt mean it only applies to salary.

We aren't going to agree on this.

From a practical perspective I've been involved in pension scheme installations where an option was given for extra pay through payroll or as an employers pension contribution. Hundreds of total employees.

How an employee decides allocate their compensation increase is nothing to do with Revenue.

VonLuck

It's an interesting point, but ultimately how could it ever be verified by Revenue? If it was ever queried, the employer/employee could just say that there was no salary offer on the table, only an increase in employer pension contributions.

Bubbaclaus

Henry Ford III wrote: »

We aren't going to agree on this.

From a practical perspective I've been involved in pension scheme installations where an option was given for extra pay through payroll or as an employers pension contribution. Hundreds of total employees.

How an employee decides allocate their compensation increase is nothing to do with Revenue.

I fully agree that Revenue are unlikely to ever find out. That doesn't mean there is no issue or that a company will have no problem doing it. Every company will have a different risk appetite.

Also, this comment implies to me that you are not understanding my posts:

"How an employee decides allocate their compensation increase is nothing to do with Revenue"

Of course that has nothing to do with Revenue. I never claimed otherwise. The tax implications of that decision absolutely do have something to do with them though.

PKB1

Bubbaclaus wrote: »

I fully agree that Revenue are unlikely to ever find out. That doesn't mean there is no issue or that a company will have no problem doing it. Every company will have a different risk appetite.

Also, this comment implies to me that you are not understanding my posts:

"How an employee decides allocate their compensation increase is nothing to do with Revenue"

Of course that has nothing to do with Revenue. I never claimed otherwise. The tax implications of that decision absolutely do have something to do with them though.

Yes I’d say I’m practical terms this happens all the time and while the motivation behind the pension contributions increase may be so tax won’t be paid Beria if paid by salary it is very hard for revenue to prove. The main issue is tax rates are too high resulting in more people doing this.