I think the consensus is to maximise pension contributions within tax incentive limits.
Hold on to your cash outside the pension
Better access
Use tax advantage eg state savings
That's my 2c
She is therefore receiving income tax relief at 52% up to age 75 which is actually better than the capped maximum 40% income tax relief on earned income.
she will also receive exit tax relief twice (two full 8 year cycles)
You don't say if she puts anything into a pensionI have a client who is 53. She has no “earned” income so can’t get income tax relief in the traditional sense.
But read the analysis before jumping to generalisations.
She has a substantial investment portfolio so is currently paying 52% tax on all investment income.
She is therefore receiving income tax relief at 52% up to age 75 which is actually better than the capped maximum 40% income tax relief on earned income.
she will also receive exit tax relief twice (two full 8 year cycles)
post 66, PRSI drops away so there is a saving of 4%pa currently on investment income.
In retirement only forced to expose 5% of income to tax ,95% remains in the ARF free from personal tax like messy exit tax calc and the QFM does the tax reporting.
final benefit ARF as inheritance is taxed at 30% rather than 33%.
so for some people a very good strategy
I am trying to understand this.
If she keeps the money in her own direct ownership, she pays 52% tax on the dividends and 33% tax on the realised capital gains.
If she puts it in to a pension fund, the pension fund won't attract any tax on income or capital gains. Is that it?
Brendan
Exit tax is a particularly nasty tax for personal assets
Hi Marc
The OP is paying tax at 20%
Presumably he does not have huge investment income.
Is he likely to be hit by exit tax? I thought it had very limited applications e.g. moving assets out of the country.
Brendan
Hi Marc
The OP is paying tax at 20%
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