What tax credits for this situation?

S

suemoo

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Hi all,

I currently pay in 5% of my wage (gross) into a pension plan and my company also pays in 5%.

As I am under 30 years old I can only claim up to 10% tax relief at the 42% rate on 10% of my total wage.

My question is if I increase my contrubtion to 10% from my gross (companys contrubution remains at 5% ) so now the total contrubution is 15% ..... can i claim the tax relief of 42% on my 10% contrubution? or does the contrubution for the company infringe that relief?

thanks!
SueMoo
 
Is your pension a PRSA or an occupational scheme.
For a PRSA, both yours and your employers contributions count towards your limit.
For an occ scheme, your employer's contribution doesn't count.

Also, the limit for under 30 is 15%
 
thanks Brian...

I wasnt aware it was 15% ....its a PRSA.

Im going to increase mine to 10% then.

thanks!
Suemoo
 
What charges apply on your employer's PRSA? If it is the maximum standard PRSA charges of 5% on each contribution and 1% annual management fee then it might be an idea to look at just contributing enough to that one to avail of employer contributions and to open a separate 0%/1% one for additional contributions. I believe that this is possible (i.e. contributing to two PRSAs at once and getting full tax/PRSI relief as long as the total contributions are under your age related limit) but you will need to claim tax and PRSI relief separately.
 
hi ...

im very lucky to have no charges at all.....I work for a financial
institution and we have a deal with another provider so its all good!

thanks
Suemoo
 
Berni said:
For a PRSA, both yours and your employers contributions count towards your limit.
For an occ scheme, your employer's contribution doesn't count.
Click to expand...

I am a bit confused about this. From research, I thought that if you weren't in an occupational scheme, i.e. were in a stand-alone PRSA where your employer did not offer any form of company pension, that your Revenue tax relief percentage limits (i.e. 15%, 20% etc.) were not affected by an employer contribution. I.E. if I am under 40, I can contribute 20% and my employer can contribute say 5% and I will not breach the maximum allowable contributions as these are different for the 'PRSA 1 (Net Pay) Certificate' scenario - see pages 18/19 of [broken link removed]. If on the other hand I am in an occupational scheme, and am making contributions to an AVC PRSA, the max allowable contribution is set at 20%.

I could be wrong on this however, as that Tax Briefing is nearly 5 years old and maybe has been corrected by a document I can't find. I would greatly appreciate it if someone could put me straight on this, as it is very difficult to get a firm answer!

On a similar issue, when do the age bands change - i.e. I remember reading somewhere that you qualify for the 30-39 band, or the 40-49 band in the year in which you turn 30 or 40, so that for example if your 40th birthday is 31 December 2007 you can utilise the 40-49 max. allowable contribution band from 1 January 2007. Is this correct?
 
Sher - the max conts to a PRSA are set in stone (i.e. it does not matter if the cont comes from ER or EE the limit is still 15%/20%/...etc as the case may be and this applies to total contributions).

You are correct, when someone will be (say) 40...even on 31 Dec 2007...in the 2007 tax year then they can base their 2007 max contribution on (for example) the 40-49 bracket.
 
If only everyone was so keen to pay their maximum pension contributions :)
 
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