How to Get Tax Relief on Pension Contributions in Ireland?

Irish employees can claim tax relief on pension contributions they or their employer make — subject to certain limits. This helps lower their overall tax liability. 

What are those limits?

How can employees claim their tax relief?

Do employers get tax relief for their pension contributions?

We’ll answer all these questions and more as we discuss how tax relief on pension contributions works in Ireland. 

Which Employees Can Claim Tax Relief on Pension Contributions in Ireland?

Employees must fulfil the following eligibility criteria to qualify for tax relief in Ireland:

• You must be contributing to an approved pension scheme (Revenue-approved pension schemes that qualify for income tax relief). The pensions available are:

  • Occupational pensions (including Additional Voluntary Contributions)

  • Personal Retirement Savings Accounts (PRSA) 

  • Retirement Annuity Contracts (RACs)  

  • Qualifying overseas pension plans

• Your income or earnings must be taxable under Schedule E or Schedule D (Case I or II).

Let’s understand how tax relief works next.

How Does Pension Tax Relief Work in Ireland?

When you contribute to a pension fund independently or through your employer, the contribution is deducted from your income before taxes are applied. 

Both employers and employees can get tax relief on these contributions. 

Tax relief is automatically applied to pensions paid via salary deduction. This can include occupational pensions, AVCs, PRSAs, etc. 

However, for private pension contributions made independently (outside salary deductions), you must inform the Revenue to have tax relief applied. 

The relief is based on your income and is applied at either the standard tax rate of 20% or the higher rate of 40% for both occupational and private pension schemes. The rate applied depends on the highest rate of income tax you pay, also known as the marginal rate.

Example: 

Suppose you pay tax at a 40% rate and make a lump sum pension contribution of €15,000 in the current tax year. In this case, you’ll get a tax rebate of €6000.

But remember:

Employee pension contributions don't qualify for relief from Pay Related Social Insurance (PRSI) or Universal Social Charge (USC). 

Moreover, there are limits on how much tax relief you can claim. 

What Are the Limits for Tax Relief on Pension Contributions in Ireland?

The amount of tax relief you can claim depends on the following limits:

• Standard Fund Threshold: The total size of your pension fund that qualifies for relief.

• Age-related Percentage Limit: The maximum contributions you can make, depending on your age.

• Total Earnings Limit: The amount of income that qualifies for tax relief each year.

• Tax-Relief Limit on Lump Sum Payments: The maximum tax-free lump sum you can withdraw from your pension.

Here is a closer look at each limit:

Disclaimer: This information is for general purposes only and should NOT be considered investment advice. Consult a qualified financial services advisor or pension provider for personalised guidance before making investment decisions.

A. Standard Fund Threshold (SFT)

Ireland’s Taxes Consolidation Act 1997 limits the total value of the tax-relieved pension savings individuals can draw in their lifetime. 

Known as the Standard Fund Threshold, this limit is set at €2 million in 2024. 

In other words, you can only claim income tax relief for a pension pot of up to €2 million.

The limit applies to pension benefits built through any of the following tax-relieved pension products:

• Defined benefit occupational pension schemes

• Defined contribution occupational pension schemes

• Retirement annuity contracts (RACs)

• Personal retirement savings accounts (PRSAs)

• Additional voluntary contributions (AVCs)

What Happens When Your Pension Fund Exceeds the SFT?

If your pension fund capital exceeds the SFT (€2 million in 2024), you’ll be taxed 40% (chargeable excess tax) on any amount you withdraw beyond this limit. 

You could stop contributing to your pension fund once it reaches the SFT to avoid paying this excess charge.

Note: In September 2024, the Irish government announced plans to gradually increase the Standard Fund Threshold (SFT) limit from €2 million to €2.8 million by 2029.

B. Annual Limits

The amount of pension contributions you can get relief on in a year is subject to two annual limits:

• Age-related percentage limit: A maximum percentage of your gross income, depending on your age.

• Total earnings limit: A limit to the total earnings (gross income) that’s taken into account to calculate your tax-relieved contributions.

These limits also apply to self-employed people. 

For self-employed individuals, earnings refer to their net annual earnings (earnings minus allowable expenses).

We’ll learn about these two limits in detail:

1. The Age-related Percentage Limit

Here’s the maximum percentage of your annual earnings eligible for tax relief on pension contributions based on your age:

• Under 30 - 15%

• 30 to 39 - 20%

• 40 to 49 - 25%

• 50 to 54 - 30%

• 55 to 59 - 35%

• 60 and over - 40%

Example:

Consider you’re 52 years old and earn €100,000 in 2024. You can contribute up to 30% of your earnings (i.e. €30,000) to your pension and still qualify for income tax relief. ​​

In other words, the first €30,000 of your contributions won’t be taxed, lowering your taxable income.

Note: Professionals under 50 who usually retire earlier than the norm, like athletes, are eligible for a higher tax relief limit (30% of net earnings).

2. The Total Earnings Limit

The ‘earnings limit’ is the maximum amount you can earn in a year and still be eligible for tax relief on your pension contributions.

As of 2024, the annual earnings limit for tax-relieved pension contributions is €115,000. It’s the maximum limit — you can contribute less if you want.

Currently, there’s no indication from the Irish government that this limit will increase in 2025. 

This limit applies whether you’re contributing to a single pension product or multiple schemes.

How Is Your Maximum Tax-Relieved Contribution Calculated?

If you’re contributing to a single pension product, your maximum tax-relieved contributions would be your relevant age-based percentage of the lower of:

• Your yearly gross income (for employees) or net relevant earnings (for self-employed) and

• The total earning limit of €115,000.

Example:

Suppose you’re 53, earning €300,000 in 2024 and contributing 20% (€60,000) to an occupational pension scheme. 

(Remember, you can contribute up to 30% for your age bracket).

Your tax-relieved pension contributions would be limited to €34,500, i.e., 30% of the earning limit of €115,000.

What if you have multiple pension products?

In that case, the tax relief only applies to the source of income used to make pension contributions. If you have more than one income source, tax relief is only applied to the income from which contributions are made.

C. Tax Relief Limit on Lump Sum Payments

Irish tax laws allow you to take a part of your pension as a tax-free lump sum, subject to certain Revenue limits.

Employees aged 50 or above can typically withdraw 25% of their pension as a tax-free lump sum (TFLS) subject to a lifetime limit of €200,000 in 2024. Any ‘excess lump sum’ amount above this 25% limit is taxable.

This applies to all pension schemes that transfer to an Approved Retirement Fund, including PRSA and occupational pension schemes.

Lump sum payments in Ireland are taxed as follows:

• Lump sum amount of up to €200,000 is subject to 0%

• Lump sum amount from €200,001 – €500,000 is taxed at 20%

• Lump sum amount of over €500,000 is taxed at your marginal rate

What if you’re a member of an occupational pension scheme?

Occupational pension scheme members with 20 or more years of service may be eligible to claim a tax-free lump sum of up to 1.5 times their final salary if the amount exceeds the 25% limit above.

Let’s find out how you can claim tax relief next. 

How to Claim Tax Relief on Pension Contributions in Ireland?

Claiming tax relief for pension contributions in Ireland involves different procedures based on your employment status.

You can make a claim either through your employer's payroll system or by using Revenue’s online service at www.ros.ie.

1. Are You a PAYE (Pay-As-You-Earn) Employee?

Your employer typically deducts your pension contributions from your salary and refunds the due tax relief. 

This means that you receive tax relief immediately at your marginal rate, and no further action is required from you to claim this relief.

What if your employer doesn't deduct pension contributions?

Use the myAccount online service on Revenue’s website (www.revenue.ie) to include your pension contributions when filing an income tax return.

2. Are You Self-Employed?

You can file and complete your annual tax return through the Revenue Online Service (ROS) before the deadline for the specific year and apply for tax relief on pension contributions. 

You must pay tax under the self-assessment system and specify your pension contributions in your online self-assessment tax return (or by completing Form 11).

We have discussed tax relief for employees so far. 

Let’s find out how it works for employers. 

Do Employers Get Tax Relief on Pension Contributions?

Employer pension contributions are payments made by an employer into an employee’s pension scheme. These contributions are tax-deductible against corporation tax, helping employers reduce their tax liability. 

Typically, when an employer provides a non-cash benefit to an employee, it’s treated as a Benefit-in-Kind (BiK) and is subject to tax. 

However, employer pension contributions are an exception.

Employer contributions to the following pension schemes on behalf of employees aren’t treated as a BiK:

• Occupational Pension Scheme (OPS)

• Personal Retirement Savings Account (PRSA) 

• Pan-European Personal Pension Product (PEPP)

The advantage?

Since employer contributions to pension schemes aren’t considered a BiK, employees don’t pay tax under the PAYE system or PRSI on the pension contributions from their employer.

Consequently, these contributions aren’t subject to the total earning and age-based limitations we discussed earlier.

How Much Tax Relief Do Employers Get For Employee Pension Contributions?

In Ireland, employer contributions to pension schemes can be offset against corporation tax, reducing employer contributions by 12.5%.

This applies to contributions made to approved pension schemes, and there’s no upper limit on pension tax relief for employer contributions. 

But here’s the thing:

Setting up and managing employee retirement benefit plans may involve extensive paperwork and substantial brokerage and administrative costs.

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7 FAQs About Tax Relief Against Pension Contributions in Ireland

Here are answers to some commonly asked questions about Irish tax relief:

1. What’s the Difference Between a Tax Credit and Tax Relief?

• Tax credits in Ireland reduce the amount of tax payable. They are deducted directly from your tax due.

• Tax reliefs decrease the taxable income and are deducted from your income before tax calculation.

2. What’s the Difference Between Ordinary and Special Pension Contributions?

• Ordinary Contributions are regular pension payments made towards your pension pot, usually deducted from your salary every month. 

  • Both you and your employer can contribute, and the amount is based on a percentage of your income. 

  • These contributions are eligible for tax relief. The amount of tax relief you can get is subject to age-related percentage limits, which increase with age. For example, employees under 30 can receive tax relief on up to 15% of their earnings, while those aged 30 to 39 can get relief on up to 20%, and so on.

• Special Contributions are one-off, lump-sum payments made to boost pension savings. You or your employer can make them, often near the end of the tax year. 

  • These contributions help maximise tax relief or make up for missed contribution payments. They also qualify for tax relief and can be backdated to the previous year if made before October 31st.

3. Can You Claim Tax Relief on Additional Voluntary Contributions Made Towards a PRSA?

You can get tax relief on Additional Voluntary Contributions (AVCs) made to Personal Retirement Savings Accounts (PRSAs). 

The amount of relief depends on age-related percentage limits, which are calculated based on your income from employment. These limits include any regular pension contributions you've already made through your job.

4. Can You Claim a Backdated Pension Tax Relief on Your 2023 Income Tax?

You can claim backdated relief for the 2023 tax year by making a lump sum of Additional Voluntary Contributions (AVCs) on or before 31st October 2024.

5. Can You Claim Your Pension Early in Ireland?

Most people can cash in their pension when they turn 50 and still be eligible to claim a 25% tax-free lump sum amount.

But there’s a catch:

If you’re a member of a company pension scheme, you must no longer be working with the employer who set up the pension scheme.

Members of PRSA or defined contribution schemes can claim their pension early if they cannot work due to sickness and have valid medical evidence. 

However, you’ll get less money than if you worked till the normal retirement age.

6. Do You Have to Pay Capital Gains Tax on Your Pension Fund?

Employees don’t have to pay Capital Gains Tax (CGT) on the growth of their pension fund. This means any gains made within the fund are tax-free.

However, when you withdraw money from your pension, either as a lump sum or regular payments, you may have to pay income tax, depending on the amount you withdraw. 

7. What Are Some Tax-Exempt Pensions in Ireland?

The following pension incomes are exempt from taxes in Ireland:

• Wound and disability pensions

• Military gratuities and demobilisation pay

• Pensions and other allowances to War of Independence veterans and their families

• Magdalene Laundry payments

• Foreign occupational and social security pensions (exempt only if the recipient lived in the country that offered the pension)

Optimise Tax Savings in Ireland with Pension Contributions

Tax relief is an excellent incentive for employees and employers to contribute towards pensions.

For employees, it reduces their income tax, which is especially beneficial for higher-rate taxpayers. Meanwhile, employers benefit from corporation tax relief on their contributions.

If you're planning for retirement, stay updated with the latest tax relief limits on pension contributions, and refer to this detailed guide to maximise your tax relief benefits.