Source: articlesbase.com
Understanding tax relief, with regards to pensions, may seem like a daunting task, but it is actually fairly simple to grasp. The first thing to understand is that, depending on the type of pension you have opted for (e.g. personal or occupational), the process of tax relief will be different. ÂWhen you are paying pension contributions towards a company pension then your employer will deduct the contributions from your Net Relevant Earnings, before any income tax has been deducted, although the Health Levy is not affected. This means that once the contributions have been invested into the pension fund, no tax has been pre-deducted, so whatever tax bracket you happen to fall into with your particular salary, you will still benefit from the full amount of tax relief. If you are paying pension contributions towards a personal pension plan then your contributions will already have been subject to tax, income tax bracket, as you are not paying out from your Net Relevant Earnings, but from your Gross Pay. In this case you are entitled to claim tax back for your contributions from the revenue services. For Irish pensions, the amount of tax relief that you are entitled to claim back is dependent on your age and the amount of the contributions; tax relief is expressed as a percentage of your Net Relevant Earnings. For younger contributors, up to the age of 30, the maximum percentage of tax relief is 15%, rising to a total 40% tax relief for individuals aged over 60 (you can find a tax relief table elsewhere on the website to establish what percentage you will be paying, based on your age). The government has set limits on the amount of tax relief an individual is entitled to, in relation to their Net Relevant Income, and for 2009 that figure is set at €150,000. Income beyond that threshold will not benefit from tax relief.  Once your pension policy is running, any growth in fund will not be subjected to any further taxation. And, once your pension begins to pay out, there will be no tax deductions taken, and you will be eligible to receive a tax-free lump-sum if 25% of the total worth of your pension.
Rochelle Martinez, Freelance Web Content Article Writer for three years. Some of her articles are about http://www.quinn-life.com
