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NEWS

Taxation of Pensions

The closing date for relief on personal pension contributions for the 2012 tax year is 14th, November, 2013.

The relief available on contributions is linked to the age of the contributor and an overall income threshold. The relevant information is as follows:

 Age% of Net Relevant Earnings
 Up to 30 years 15%
 30 but less than 40 20%
 40 but less than 50 25%
 50 but less than 55 30%
 55 but less than 60 35%
 60 years or older 40%

Individuals who are engaged in specified occupations and professions – primarily sports professionals – qualify for a minimum 30% deduction irrespective of age.

There is an earnings cap of €115,000 per annum for each individual. Therefore, for example, an individual aged 42 years who earns €200,000 per year can make a maximum tax allowable pension contribution of €28,750 per annum i.e. €115,000 x 25%

Budget 2014 Information

There is no change in tax relief on pension contributions this year, but from 2014 relief will be limited to a fund which will provide a final annual pension of €60,000. How this is to be calculated is not yet clear, but we would expect this to equate to retirement fund value of approximately €1.5m. In the meantime, the Standard Fund Threshold has also been reduced from €2.3m to €2m.

There will be a once-off option to withdraw up to 30% of the value of funded Additional Voluntary Contributions (AVCs) made to supplement retirement benefits. Withdrawals will be liable to tax at an individual’s marginal rate. The option to withdraw will be available for 3 years from the passing of Finance Bill 2013.

FMB Chartered Accountants are experts in Taxation. For information and advice, email us at enquiry@fmb.ie or call 01 645 2002. You can also sign up for our quarterly newsletter full of tips and updates on topical issues which are of interest to our clients and followers.

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