Pension tax relief - clarification on process

R

redwellies

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I recently got a promotion (Public Servant) resulting in just under €5k additional earnings per year, gross.
If I was to put all of this additional money into a pension, would I then reduce my annual tax on my typical fortnightly take-home wages?
Is this how it works?
At present I am only coming home with around 48% of that €5k each year because of various deductions- tax, usc, pension levy etc
If I put it all into a pension, do I then have that €5k in the pension pot while my annual tax burden is reduced by 40% of the €5k total….
I hope this makes sense…. Trying to get my head around it….
 
Congratulations on your promotion. My answer below assumes the rules for the private sector are the same as AVCs in the public sector.

It depends on what your current pension contributions are and your age this year. In your thirties, Revenue allows you to contribute up to 20% of your annual earnings and you are not taxed (PAYE) on that element of your income.
Every decade onwards results in a higher percentage. An overall salary cap of €115,000 applies.

So assuming you have “headroom” of at least €5000 between what you are currently paying in to your pension and the revenue limit for your age, then if you pay all of your €5k pay rise in to your pension, your current income tax bill not be increased or decreased as a result of your promotion and pay rise. The pay rise will be tax free. Note PRSI and USC will still apply to the €5k. Hope that helps.
 
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