Tax relief on pensions

Introduction

If you are a member of an approved pension scheme, you can get income tax relief on your contributions to the scheme.

You pay tax on the pension when you receive it. For more information on the way in which pension income is taxed see our document on taxation of pensions.

The rate of tax relief on your pension contributions is at the highest rate of income tax you pay, also known as the marginal rate.

There are various rules that pension schemes must meet in order to get the tax relief and there is a limit to the amount of the relief.

There is no relief on PRSI or the Universal Social Charge for employee pension contributions.

Limits on tax relief

There is a limit on the overall value of your pension fund that you can get tax relief on. This is called the Standard Fund Threshold. The absolute value of the Standard Fund Threshold is €2 million. If the fund is greater than the limit, then tax at 40% will be charged on the excess when it is drawn down from the fund.

Annual limit

There are limits to the amount of pension contributions you can get relief on in any one year:

  • A maximum percentage of your income, depending on your age
  • A limit to the amount of income that can be taken into account to calculate the percentage

The maximum amount of gross income taken into account to calculate the percentage is €115,000.

The maximum percentage of gross income you can get relief on is:

Age Limited to
under 30 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
60 or over 40%

For employees, earnings means gross pay for tax purposes. For self-employed people, earnings means net relevant earnings, that is, earnings less allowable expenses.

If you are a sports person or a professional who usually retires at an earlier age than the norm, you can get tax relief on 30% of your net relevant earnings regardless of your age.

If you have more than one source of income, the relief is only on the source of income that contributions are made from.

Tax relief on lump sums at retirement

When you retire, you can usually take part of your pension fund as a tax-free lump sum. The amount you can take depends on the type of pension plan you have and how much you have taken in tax-free lump sums from other pension plans.

There is a limit of €200,000 on the amount of the tax-free retirement lump sum. Lump sum payments are taxed as follows:

Amount of lump sum Income tax rate
Up to €200,000 0%
€200,001– €500,000 20%
Over €500,000 Taxpayer's marginal rate

The maximum tax-free lump sum payment from an occupational pension is 1.5 times your final salary and this amount is dependent on having a certain number of years of service. The maximum that can be taken as a tax-free lump sum from a Personal Retirement Savings Account (PRSA) or Retirement Annuity Contract (RAC) is 25% of the fund.

How to apply

Usually your employer deducts the contributions directly from your pay, and will give you the tax relief due. If your employer does not deduct the contributions, you can use myAccount to complete and file an income tax return.

If you’re self-employed, you can apply for tax relief on contributions by using the Revenue Online Service (ROS).

Revenue has a video explaining how to claim tax relief for pension contributions.

Page edited: 19 October 2021