Employees contributing into a Scheme set up for them by their employer may benefit from a number of tax benefits, namely:
- Tax Credits: employees will be eligible to a tax credit equivalent to 25% of their contributions, up to a maximum of €750 per employee per year. This tax credit is in addition to any tax credits available to individuals who also contribute to a personal retirement scheme.
- Tax-Free Growth: Investments are exempt from tax on any profits made over the years. Such growth is normally taxed at a rate of up to 15%.
- Fringe Benefit Tax Exemption: any contributions made by employers, whether one-off or monthly, are not subject to Fringe Benefit Tax by the employee.
Tax Free Lump Sum at retirement: Employees can withdraw up to 30% of their accumulated savings as a tax-free lump sum upon retirement, when they are between the ages of 61 and 70.
After retirement, income received from the personal pension will be paid to the employee over a number of years, and it would be subject to income tax at the individual’s marginal rate of tax applicable at the time (less any available deductions).
Laferla does not offer tax advice, and clients are encouraged to seek advice from tax experts if they would like to know how taxation will apply in their specific circumstances.