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Employers Pension Contribution and Income Tax

  • 23-11-2020 9:15pm
    #1
    Risteard
    Registered Users, Registered Users 2 Posts: 2,698 ✭✭✭


    Hi,

    Quick question on something I saw in one article online but haven't seen anywhere else.

    Do Employers' pension contributions count towards an employees earnings for the purposes of calculating the amount allowable for tax relief?

    Example:
    A is 35 and earns €60K a year. A's employer contributes 5%, or €3K, to a pension scheme.

    I would have thought that the maximum additional contribution A can make would be €9,000 - bringing the total contribution to €12,000 or 20% of their salary.

    However one site suggests that the 3K paid by the employer is included in the calculation meaning that in the above example, A could make an additional contribution of 9,600 - bringing the total contributions to €12,600 or 20% of the 60K + 3K employer contribution?

    Just wondering if anyone has come across this?


Comments

  • #2
    namloc1980
    Registered Users, Registered Users 2 Posts: 18,329 ✭✭✭✭namloc1980


    Yeah that's right. The employees contributions are distinct to the employers contributions. The employee in your example can make 20% contributions by way of AVC and/or regular contributions and get tax relief on those contributions. The employers 5% is on top of that and they can claim separate relief on that against corporation tax. It all goes into your pension fund though.


  • #3
    relevanc
    Registered Users, Registered Users 2 Posts: 55 ✭✭relevanc


    The employer’s contribution is considered similar to a BIK but with tax relief available.
    It is included as income for the employee from a tax perspective.


  • #4
    namloc1980
    Registered Users, Registered Users 2 Posts: 18,329 ✭✭✭✭namloc1980


    They aren't considered a BIK unless it's a PRSA.

    https://www.pensionsauthority.ie/en/lifecycle/tax/tax_relief_on_employer_contributions/


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