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Personal Retirement Savings Accounts - unlike an RAC, anyone can take out a PRSA; you
don’t have to have relevant earnings to take out a PRSA. However, income tax relief on
personal contributions to a PRSA can only be obtained against;
• Income earned from a self-employed trade or profession or from a non-pensionable
employment, i.e. relevant earnings referred to above.
• OR
• Income from a pensionable employment, where the contributions to be paid to the
PRSA are additional voluntary contributions (AVCs) to top up their employer’s pension scheme benefits.
Employers who do not include some or all of their employees in an occupational pension scheme for retirement benefits within six months of joining, must allow those employees to contribute to at least one Standard PRSA nominated by the employer, and allow such employees to contribute to the PRSA by deduction from earnings before applying PAYE, thereby providing immediate relief against income tax. This is usually referred to as the net pay system of providing income tax relief on pension contributions.
An employer is not obliged to contribute to an employee’s PRSA but can do so if they wish.
Personal Contributions to RACs and PRSAs
An individual who pays into an RAC and/or PRSA can deduct the contributions from their
relevant earnings for income tax purposes (but not for USC or PRSI), up to a limit each year related to the individual’s age and net relevant earnings (NRE) in that tax year:
Age attained during year Income relief limit (as a % of NRE)
Less than 30 15%
30 to 39 20%
40 – 49 25%
50 – 54 30%
55 – 59 35%
60 and over 40%
There are exceptions to the table above:
• Certain professional sportspeople, for example, football and rugby players, are allowed a higher 30% of net relevant earnings limit on RAC/PRSA contributions made under age 50, for earnings derived ‘wholly or mainly’ from their sports occupation.
• The maximum net relevant earnings that can be taken into account for the purposes of the tax relief limits on RAC and PRSA contributions is currently € 115,000.
Example: Shane is a self-employed doctor. His net relevant earnings for 2023 are € 250,000. Shane is aged 53 in 2023. The maximum total contributions to RACs and PRSAs combined, which Shane can offset against his relevant earnings for income tax purposes in 2023 is: 30% x € 115,000 (the NRE limit) = € 34,500.
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