What’s new for Pension Contributions in 2011?

in 2010, if you were a higher rate tax payer and made contributions to a pension, you were allowed relief of income tax at 41% – but also you did not have to pay PRSI or Health Levy.  You would have been paying Income Levy on the contributions. All pension contributions are subject to maximum allowable contributions.

4 Year plan – pension changes

Under the 4 year plan, the amount of relief from Income Tax will be reduced from 2012 onwards.  With 34% relief in 2012, 27% relief allowed in 2013 and down to just 20% in 2014. 

But no change to the amount of relief you are allowed from Income Tax in 2011.

Budget 2011 – Pension Changes

Following Budget 2011, Tax Relief from Income Tax is still allowed at a Maximum 41%.  But two very significant changes are:

• Pension contributions are now subject to PRSI.  This  will result in a 4% PRSI charge on pension contributions for many.
• Pension contributions will be charged the Universal Social Charge (USC).  This is charged at 7% on earnings above ~ €16,000, so is much in excess of the old Income Levy charge

For most people, this will result in paying 7% tax on pension contributions in 2011 than in 2010 – get an estimate of this difference for you with our 2011 Budget Calculator