In recent Budgets the government have sought to reduce and in some instances eliminate the availability of tax reliefs and other incentives previously offered by Revenue.

With regard to tax relief on pension contributions the earnings cap that applies to the age-related limits for tax relief on pension contributions has been reduced downwards from €275,239 in 2008 to €115,000.

The Standard Fund Threshold (SFT) was introduced in 2005. Pension contributions in excess of the SFT are ineffective for tax relief purposes. Since December 2010 this SFT was at €2.3 million. However, Budget 2014 saw this being reduced to €2million from 1 January 2014.

In line with previous SFT reductions, individuals with pension rights in excess of €2 million are able to protect the capital value of these rights by claiming a Personal Fund Threshold (PFT) subject to a maximum of the previous PFT of €2.3million.

Individuals have until 1st July 2015 to apply for a PFT based on a fund valuation in excess of €2 million but less than €2.5 million as at 1st January 2014.

Still Time to Make a Pension Payment to Reduce your 2014 Income Tax Liability
Pension contributions made before October 31st 2015 can still be backdated to 2014 for income tax relief purposes at the taxpayer’s highest rate. But, once this date has passed the opportunity to claim this relief may be lost.
 

Historically, Revenue have extended the payment deadline to the 13th November in line with the extended on line income tax return filing deadline. It was the 24th October 2013 before Revenue issued confirmation of the extended deadline in relation to 2012 payments. Therefore, it is likely that Revenue may still issue similar confirmation in relation to extending the date for back dating pension payments for 2013.

At this point however it would be advisable to work on the assumption that the 31st October deadline applies and make your qualifying pension payments on or before this date.

From a tax point of view, if you are paying tax at the higher rate, currently 40%, then the tax saving of making qualifying pension payments is also at 40%. That is for every €100 qualifying contribution your income tax bill will be reduced by €40.

Note that this is the tax relief on entry only. It is important to look at the tax situation in accessing the money in retirement.

Tax relief on pension contributions is subject to two main controls.

1. Age Related Control

This provides that the maximum pension contribution an individual can make on which they will receive tax relief may not exceed the relevant age related percentage of the individual’s remuneration/net relevant earnings in a year.

      2.  Earnings Limit

The second control places an overall limit on the amount of remuneration/net relevant earnings that may be taken into account for the purpose of claiming tax relief.

For 2014, this limit is set at €115,000 and applies whether an individual is contributing to one or more pension products.

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