Occupational and PRSA pensions with tax relief on both from the same employment

harringtonp

Hi,

At https://www.citizensinformation.ie/en/money-and-tax/personal-finance/pensions/occupational-pensions/ I see:

"You can be a member of an occupational pension scheme and also arrange a personal pension. However, it may not be possible to claim tax benefits for both. You cannot contribute to an occupational pension scheme and a personal pension arrangement at the same time for the same employment. However, you can make a personal pension arrangement for earnings from another employment or from self-employment."

This surprises me because my understanding was that you could contribute to as many schemes as you want using the same employment and get tax relief on them all once the total percentage of your salary in a given year is less than the revenue age based percentage and your salary is under the 115,000 limit. This was the advice given by a financial adviser but perhaps I misunderstood.

My specifics are that I will join an occupational pension scheme where the standard employee and employer contributions are 3%. While I could make an AVC to this scheme, I would prefer pay excess into a (yet to be opened) PRSA simply because my understanding is that this allows more options on retirement and flexibility in the event of moving jobs. My understanding was that when filing a Form 11 income tax return I could pay a lump sum into a PRSA and claim relief on it once the combined percentage of the salary (3% and whatever percentage I put into the PRSA) is within revenue age limits. This understanding conflicts with what is on citizensinformation above,

Can anyone clarify ?

Thanks

Mrs OBumble

I've had advice from a good financial advisor which is consistent with what you got from CI: Revenue (the government's) rule is that for each employer you can only get tax relief for one pension.

I have no idea what the real rule is, just quoting what they told me when my employer set up a scheme that I wanted to join: I had to stop contributing to my previous scheme.

Geuze

You can, as the PRSA will be an AVC-PRSA.

Tow

I have looked for, but never found the legislation which backs up this 'rule'.

I can see it being a rule from times past when it was harder for Revenue to keep track of multiple pensions.

I have also see public sector employees paying into 6 pensions at the one time! Don't ask, some sort if mess from moving around, being seconded to another area and taking career breaks.

ROS also has no problems handling Company, Private, normal AVC and additional AVCs contributions in the same tax year.

harringtonp

Thanks guys. I take it that the general consensus is that I can. I had a quick look in ROS and the impression I got is that it is set up for this

https://www.boards.ie/discussion/comment/121095059#Comment_121095059

Tax relief will be given at source on the occupational pension contributions.

Add the PRSA contributions in your Form11 and claim your tax relief on those.

Job done.

The scenario being described by OP (CI) is where you are a member of an occupational pension scheme - in this case you can't set up a RAC or PRSA but you can do any number of PRSA AVCs or AVCs within the Revenue limits because they relate to the same employment.

What CI mean by Personal Pension is RAC or PRSA.

If you were a member of an occupational pension scheme and also had self-employed income you could have an RAC, PRSA or Executive Pension (if co. director) for that second employment income stream.

harringtonp

What do you mean by

"you can't set up a RAC or PRSA but you can do any number of PRSA AVCs or AVCs within the Revenue limits because they relate to the same employment."

Will your PRSA AVCs not be to the PRSA that you previously set up ?

harringtonp

Actually there is a simple concept I'm must be missing as I see this crop up elsewhere. In

https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-26.pdf

they give an example:

======

Example 4 :

Sidney, aged 51, has earnings from an employment of €180,000 in 2022. He also has self-employed income of €100,000. Sidney makes the following pension contributions:

 10% of salary (€18,000) which he is required to make to an occupational pension scheme established by their employer, and

 15% of self-employed earnings (€15,000) to a PRSA.

Because Sidney is aged between 50 and 55 years in 2022, the maximum pension contributions to the occupational pension scheme on which he is entitled to claim tax relief for 2022 is the lower of:

 His actual contributions (€18,000) and

 30% of the earnings limit of €115,000 (€34,500).

As Sidney’s contributions are €18,000 he can claim relief on that amount.

However, no tax relief is due in 2022 for Sidney’s contributions to the PRSA as he has used up his aggregate earnings limit in contributing to his occupational pension scheme.

As in Example 3, if Sidney has scope to make AVCs, he could increase the amount of tax relievable contributions on their earnings from employment by up to €16,500:

Maximum tax relievable contribution permissible (€115,000 x 30%) €34,500

Less contribution made to the occupational pension scheme (€18,000)

Maximum potential additional tax relievable contributions €16,500

=======

What doesn't make sense to me is that they say

"no tax relief is due in 2022 for Sidney’s contributions to the PRSA as he has used up his aggregate earnings limit in contributing to his occupational pension scheme."

and then:

"if Sidney has scope to make AVCs, he could increase the amount of tax relievable contributions on their earnings from employment by up to €16,500"

Is a PRSA not just an account to which you make contributions. The example seems to be saying that his regular contributions cannot be used but if he makes AVC this does count. What is the difference between the AVC and his regular contributions to his PRSA ? Are they all just not "contributions" ?

harringtonp

Basically I'm looking to setup a PRSA soon and then make a single contribution. I expect I will be able to offset this against tax paid in 2022 when filing my 2022 Form 11 return via ROS (in fact would be expecting a refund in this case)

When it comes to this time next year and I am filing a return for 2023, I would probably want to make a similar single contribution to the same PRSA account. What I am trying to confirm is that the 3% paid into the occupational scheme that I'm joining won't prevent me from getting the same relief for the contribution in 2023 as that got for the 2022 contribution once the total of both comes under the age limit percentage ?

A PRSA can be put in place if you're self employed or in employment but not a member of a pension scheme.

An AVC PRSA is a completely different animal and can be bought if you're a member of an occupational pension scheme.

You cannot use an existing PRSA for the same purpose as an AVC PRSA. The tax certificates issued on both are completely different - PRSA1 for a PRSA and PRSA2 for an AVC PRSA.

The AVC PRSA will be linked to the main occupational pension scheme and must be matured at the same time.

For the tax year 2022 you weren't in the occupational pension scheme.

If you've said what your employment status was for 2022, I've missed it.

harringtonp

Thanks that clarifies to some extent. In 2022 I was employed by the same company but had not joined their scheme so for 2022 didn't make any pension contributions at all through PAYE. I have file Form 11 through ROS for years due to a small amount of rental income

Tow

https://www.boards.ie/discussion/comment/121095450#Comment_121095450

Where is the legislation for this 'rule'?

I cannot find it. It would not be the first or past time that 'rules' for pensions have propagated over the years with no legislation behind them. Employer contributions to PRSA being a being a mess, which has 'changed' multiple times over the years. From memory they are currently an Employee BIK, but Revenue will give dispensation on income tax.

What 'rule'?

The eligibility for a RAC or PRSA or the dual income scenario?

(No BIK on PRSA anymore)

Gerard.

harringtonp

By playing around with the Pension Relief calculator in the online Form 11 and reading the associated help you can test scenarios and at least get some feel of what's possible when making future returns.

There is a Section A for occupational schemes where you enter your gross occupational income. It also has a field Superannuation Contributions/AVC where not deducted by employer where you can enter an AVC PRSA amount which is then sent back to the PAYE/BIK page

There is also a Section B self employed which has a Non Pensionable PAYE Income box for entering a PAYE amount and the maximum relief is sent back to the pensions section of the Charges and Deductions pane. In this section you then enter in the AVC amount.

In both cases the contribution relief will appear when you hit the calculate button on the main pane

harringtonp

And I correct in that a PRSA acts like a normal savings account in the sense that each contribution buys more units from whatever funds are set up and when you look at it you see a cumulative total for all your contributions ?

Would this be what would be expected if looking at one online ? In other words, you see your contributions but there is a single total unlike once off contributions where each contribution is a different contract.

https://www.boards.ie/discussion/comment/121140287#Comment_121140287

Yes on the first part.

You can request multiple policies for each contribution - usually a new application each time - or you can put additional lump sums into the same contract/policy number.