# What is the effective rate of tax relief on pension?

#### Brendan Burgess

##### Founder
Roma Burke and Tony Gilhawley have an excellent paper here on tax aspects of pension contributions. This paper is now available on the SAI website here.

We loosely say that "higher earners get tax relief of 40% on pension contributions."

They see it differently

But does this show the full picture?

The Higher Rate taxpayer gets €800 of pension fund for his €1,000 contribution. The Standard Rate taxpayer gets €891.

OK, if they were not contributing to a pension, the HRT would get €480 net while the SRT would get €712 net.

So the HRT is getting €800 of a pension fund for €480 - a 66% top-up

The SRT is getting €891 for €712 - a 25% top-up.

Brendan

#### jdwex

##### Frequent Poster
The Higher Rate taxpayer gets €800 of pension fund for his €1,000 contribution. The Standard Rate taxpayer gets €891.

OK, if they were not contributing to a pension, the HRT would get €480 net while the SRT would get €712 net.

So the HRT is getting €800 of a pension fund for €480 - a 66% top-up

The SRT is getting €891 for €712 - a 25% top-up.

Brendan
I think you mean to say that the HRT pays 800 euro for his 1000 euro pension fund, the LRT pays 891

#### cremeegg

##### Frequent Poster
I think you mean to say that the HRT pays 800 euro for his 1000 euro pension fund, the LRT pays 891
I think that HRT has a fund of €800 from earnings of €1,000 and SRT has a fund of €891. Assuming both make a max contribution from earnings of €1,000

#### odyssey06

##### Frequent Poster
The income from the pension is taxable above certain amounts.

#### jdwex

##### Frequent Poster
I think that HRT has a fund of €800 from earnings of €1,000 and SRT has a fund of €891. Assuming both make a max contribution from earnings of €1,000