Putting Bonus into my DC pension

[JohnRoberts]

I am due to get a bonus in July of €10k and am unsure of the cost to me if I was to put it into my pension vs pat the taxes and recieve it net in payroll? Am I right in calculating it as follows: Either I'll pay approx 52% in taxes but if I was to ask payroll to put the €10k into my pension how would that work figures wise? I know I'd get 40% relief so thats €4k minus prsi and usc @ 12% (€1200) giving me €2800 back in payroll.

I'd appreciate if someone could tell me I'm all wrong or if I'm right in the workings.
TIA

 

[fayf]

If you direct the 10k bonus to be a Pension AVC, then, assuming doing that, will

1)not put you over the age related max pension contribution.

2) you have a marginal PAYE rate of 40 %

3) you have enough gross pay as at July, currently being taxed at 40 %, ie more than 10 k up to July.

will get 40 % PAYE relief on the bonus, but you will still pay PRSI & USC.

PRSI will be applied at 4 % if you are class A - €400

USC, is applied at your marginal USC rate, i will assume this is 8%, then the extra USC due on bonus is €800.

If the above details are correct, putting the 10k into AVC, will have a nett pay impact of €1,200 in the month of payment.

Its worth noting that, if you don’t put the bonus into AVC’s, and take it as pay, you will
Still pay €1,200 in USC & PRSI, that is unavoidable, its only the 4k thats avoidable, if you direct it into AVC’s.

 

[JohnRoberts]

Thanks that explains it perfectly, much appreciated.

 

[ivannomonet]

IS that not considered Salary sacrifice?

 

[Dave Vanian]

IS that not considered Salary sacrifice?

No. The above reply by @fayf involves having the bonus paid as salary and then paying it as an AVC.

Salary sacrifice would be where the OP asks his employer to pay an amount of money directly into the pension fund as an employer contribution in lieu of salary.