Home Services Financial Advisory Services Retirement Planning Personal Pension Plan

 

Personal Pension Plan

A personal pension plan is a private pension structure available to the self-employed individual or to those in non-pensionable employment. The traditional personal pension plan is managed for the holder by a life assurance company or investment firm in order to provide benefits for the holder in retirement. The value of the pension fund at retirement will depend on the level of contributions made to the plan, the investment growth of the pension fund and the level of pension charges paid throughout the term of the plan. A portion of the fund may be taken as a tax free lump sum at retirement.

Tax Relief/Net Relevant Earnings

Holders of a personal pension plan are entitled to receive full income tax relief at their marginal tax rate on their pension contributions based on current legislation (there are proposed changes to this but it is not yet clear if these will come into practice). However, there are limits on the amount of tax relief that can be claimed. As highlighted below, these limits are influenced by the person’s age and is a percentage of their net relevant earnings, up to an “earnings ceiling” of €115,000. Holders of these plans are entitled to pay their pension contributions monthly or annually by direct debit or can pay a “once-off” contribution e.g. at the end of the tax year depending on their taxable earnings.

Age % of relevant earnings eligible for tax relief

Under 30 years

15%

30 – 39 years

20%

40 – 49 years

25%

50 – 54 years

30%

55 – 59 years

35%

60 years and over

40%