Employee
Pension
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What is an Employee Pension / PRSA?
A PRSA (Personal Retirement Savings Account) is an investment account that you use to save for your retirement. You can get a PRSA if you are a part-time or casual employee, homemaker, carer, contractor, highly paid professional, employer, or employee. If your employer doesn’t provide you with access to a pension scheme, you have access to your own PRSA.
There are two types of PRSA:
- Standard PRSA
- Non-Standard PRSA
The main differences are:
- The charges are capped for standard PRSAs but not for non-standard PRSAs
- Types of investment are restricted in standard PRSAs but not in non-standard PRSAs
Non Standard PRSA: Offer a wider variety of fund options than a standard PRSA, but can be subject to higher charges.
Standard PRSA: Slightly more restrictive fund options but generally the fund choices are broad enough to suit most individuals.
Features
- Increase, decrease or stop your contributions at any time without any charges.
- Highly tax efficient compared to a savings account. You can maximise your tax-free lump sum upon retirement and are also eligible for tax relief on your investment. e.g. If you invest €100, it will only cost you €60 assuming you pay tax at 40%.
- Carry your PRSA from one job to another.
- You can choose to continue making contributions after you retire – up to age 75.
- Personally monitor your pensions performance.
- You can hold a PRSA in addition to other types of pensions (Contact us for details).
- Your employer can choose to make contributions.
Reduce your Income Tax Bill with a Pension
Tax relief reduces the actual cost of your pension. You do not have to pay tax on money that you put into a personal pension (This falls within the limits set out below). This is calculated at the highest rate of tax you pay (Currently 20% / 40%)
Example 1:
Monthly contribution = €100
Tax Relief (40%) = €40
Cost to you = €60
Example 2:
An employee who is aged 42 and earns €40,000 per year
can get tax relief on annual pension contributions up to €10,000.
There are no limits on the total amount you can pay into your pension, but tax relief is only available on the percentage amounts of your income and age outlined below.Â
Age during the year
Percentage of earnings
Under 30
15%
30 to 39
20%
40 to 49
25%
50 to 54
30%
55 to 59
35%
60 +
40%
*Data according to Aviva & Zurich Pensions Dec 2019. Percentages shown are of earnings up to €115,000. If you’re a professional athlete, your limit will be 30% of earnings. These figures are subject to change in the future.
Your Questions Answered
An pension plan is a longterm investment savings plan that helps you put something aside for your retirement. A pension plan enables you to pay regular tax-friendly installments or move one-off lump sums into a fund available to you on retirement. The amounts saved into your pension are called ‘contributions’
We’re living longer than previous generations. Upon retirement, on average we will have 20-30 years of retirement. A pension plan will make sure you’re financially sound for these years. Whether you wish to travel, retire to the country, or spend time with your children & grandchildren.
As soon as possible. The money that you pay into your pension grows over time. It’s quite simply Time x Money. The sooner you start paying in; the more money will be available to you upon retirement.
The amount you will receive per month entirely depends on how much you’re willing to pay per month, the length of time you’ve been making contributions, the type of pension plan and its investment return. You can also choose to receive a lump sum upon retirement or not.
As of today, the State Contributory Pension is about €240 per week. For most people, during their 20-30 years of retirement, this simply isn’t enough. When you pay into a pension plan, you will receive both the state pension (If available to you) and your Pension Plan.
Tax relief reduces the actual cost of your pension. You do not have to pay tax on money that you put into a personal pension (This falls within the limits set out below). This is calculated at the highest rate of tax you pay (Currently 20% / 40%)
Example:
Monthly contribution = €100
Tax Relief (40%) = €40
Cost to you = €60
If you have to retire because of medical reasons and you get Revenue approval, you can receive your benefits from your Pension immediately.
If you unfortunately pass away before you retire, your Pension will be paid to your estate.
Contact us about Employee Pensions
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