Pension Frequently Asked Questions
Do Teachers, Nurses and Civil Servants get the State Pension?
If you started in the Public Sector prior to the 6th of January 1995 and have not broken your service for more than 6 months, then you likely don’t. This is because you will get all your pension benefits from your employer.
You qualify for a higher pension from your employer than a colleague with the same service and pensionable salary who started service after the 6th of April 1995 as they will get some or indeed all the State pension. If, however you worked in the private sector prior to your time in the Public Sector then you may. You should request a statement of your PRSI record to find out.
How to claim tax relief on pension contributions in Ireland?
The easiest way is to get set up on Revenues myAccount. We have a video posted on how to get set up and will be posting a video on how to claim your pension contributions in the next few weeks. You can claim for the current year and go back to the previous 4 years (2018, 2019, 2020 and 2021).
Once this is done you will see your net take home pay increase by either 20% or 40% of your pension contribution. For those with taxable income in excess of €36,800 you should see a 40% increase and those below €36,800 by 20%.
How much can I contribute to a pension scheme?
If you are a company director and you wish to contribute, then I suggest you get in touch as there are various different rules and limits than apply. If you are an employee or are self employed and wish to make a personal contribution, then you will be subject to age related limit which is capped at an income of €115,000. So, if you earn in excess of €115,000 your age related percentage will be to a maximum of 15% to 40% of €115,000. Please see the age-related tables below.
There are some occupations such as professional sports people who can contribute 30% regardless of their age due to the earlier retirement ages of the job.
How Much is the illness benefit and the invalidity pension?
The invalidity pension was increased in the last budget from €203 per week to €208 euro per week. If you have a qualifying adult dependent, then this increases by €138. There is an also an increase of a maximum of €40 for each child under the age of 12 and €48 over the age of 12.
If you have been unable to work long term (for more than 12 months) then you may qualify for the invalidity pension.
The illness benefit was increased in the last budget from €208.5 per week to €213 euro per week. If you have a qualifying adult dependent, then this increases by €152.50. There is an also an increase of a maximum of €40 for each child under the age of 12 and €48 over the age of 12.
What is an occupational pension?
An occupational pension scheme is basically a pension scheme which is provided by an employer for the benefit of their employees when they retire. Often both the employer and the employee contribute. The employee’s contribution usually is taken from their gross pay, and they get their tax relief at source. There are two types;
- Defined Benefit – these schemes provides a pension and lump sum at retirement based on years of service and salary. Often the pension can be to a maximum of half of final salary less the state pension plus a lump sum of up to 1.5% the employee’s pensionable salary.
- Defined Contribution – with a defined contribution scheme the employers and employee’s payments are used to purchase units in a fund, the value of this fund at retirement will determine the pension and lump sum paid.
There are pros and cons of both schemes. Very few private sector companies now have defined benefits schemes for their employees. A Defined Benefit Scheme is a benefit of working in the Public Sector in Ireland.
Can I buy a pension with Cash?
If you have cash to save contributing to a pension is a great way to build up money for retirement. The payments benefit from tax relief and the fund you are invested in will grow tax free. You will have restrictions on how the money is drawn down at retirement and how much you can take tax free.
There are many different types of pensions and it is important to ascertain the most suitable type before you invest, be that a Company Pension, PRSA, Personal Pension or an Additional Voluntary Contribution (AVC).
Can I cash out a pension early?
This a very broad question and it will really depend on the type of pension plan you are in. Personal Pensions and PRSA’s can be taken from age 60. Company pensions can usually be taken at your normal retirement age, but you may be able to go at an earlier age if you retire early or leave service due to new employment. It will also depend on the rules of the scheme and you may need to transfer your pension to a Personal Retirement Bond also known as a Buy Out Bond.
If it is a Defined Benefit scheme (such as a public sector pension scheme) there are penalties for retiring early. If you leave employment of a companies defined contribution scheme you may be able to take benefits from that scheme from the age of 50 by transferring to a Personal Retirement Bond. Make sure to take advice before doing so as it is important than you understand the pros and cons.