Maximum Pension Contributions

pillphil

My employer matches my pension contributions by 8% of salary.

I'm 32, so my contribution limit is 20%. Am I correct that I can make 21% contributions and stay under the limit? (100% of salary + 8% emp con / 20 = 21.6)

coylemj

If you're currently contributing 8% and your limit is 20%, that means that you can make an additional contribution (typically via AVC) of 12% of gross earnings while keeping your contributions tax free.

Gross earning can include taxable benefits such as BIK for a company car but does not include pension contributions as suggested by your formula.

pillphil

Grand, thanks for that, that's what I originally thought.

I had read this and was unsure

If your employer contributes to a PRSA on your behalf it is important to note that employer contributions count against your maximum total contributions.

EXAMPLE: Take Jim in the example above, who is 42. Suppose that both Jim and his employer are contributing to Jim’s PRSA. If Jim’s employer is contributing a figure equal to 10% of Jim’s salary to the PRSA, then Jim’s own personal contributions are limited to 17.5% of salary. This is because the maximum percentage of net relevant earnings that can be contributed at his age is 25% inclusive of the employer contribution but the 10% employer contribution can also be included in the net relevant earnings calculation i.e. Jim can contribute 25% of (salary plus employer pension contribution) less employer pension contribution.

https://www.oneview.mercer.ie/content/mercersubdomain/global/en/oneview/plan-your-pension/retiring-soon/maximising-pension-contributions.html

So just for the sake of my clarity, Employer contributes 8% and i can contribute 12% making 20% total?

Edit: ah, is the difference that I have an occupational pension scheme and not a PRSA? It's a company pension scheme.

Fol20

Depending on the type of pension scheme your in. I thought your enployer controbutions are not counted toward your limit so for example in your case if your limit is 25pc. You could contribute 25pc of your salary along with the companys 8pc

pillphil

Looks like you are right, it only mentions emmp cons for PRSA on revenue.ie but this site agrees with you:

Contributions paid by employers to occupational pension schemes are not treated as a benefit-in-kind and can be paid in addition to the contribution limits for employee contributions.

https://www.pensionsauthority.ie/en/LifeCycle/Tax/Tax_relief_on_employer_contributions/

coylemj

Yes, Fol20 is correct, you can ignore the employer contribution for this purpose.