Q. I have money in my personal bank account. Should I invest this in my pension? A. Firstly you need to seek advice on whether this is in your best interest or not. Regardless of where your pension contribution your pension fund until you retire, so any of this money that may be required in an emergency or for short or medium term purposes would be inaccessible in most cases unless you are over 60 in which case access may be possible depending on the type of
Q. I am a medical consultant with HSE income which is pensioned via a Defined Benefits pension scheme with a mandatory member contribution but I also have private practice income which I would like to pension via a Personal Pension. How is the earnings cap apportioned between these two incomes? A. The Revenue Commissioner’s rule is that the income already pensioned which has a mandatory member contribution must a Personal Pension. For example, let’s say your HSE gross salary is €100,000 and your private practice net relevant earnings are (€115,000 - €100,000) of the private practice income. This means that if you are in your forties in 2016 your maximum contribution to a Personal Pension is €3,750 (€15,000 X 25%). You can of course backdate a voluntary pension contribution to 2016 in respect of the HSE pension scheme of 25% of the 2016 gross salary of €100,000 minus whatever member contributions have already been made to the main scheme for 2016. (This example assumes the Standard Fund Threshold will not be breached at any time up to and including Normal Retirement Age).
Q. I am a General practitioner with both GMS income and private practice income. As I aM a member of the GMS pension scheme, how do I apportion the earnings cap of €115,000 and calculate my maximum backdated pension contributions? A. Even though your GMS (General Medical Card Scheme) income is treated for income tax purposes as Schedule D income, the GMS Pension Scheme is actually approved as an occupational pension scheme with a mandatory member pension contribution and as such, the GMS income must be deducted from the earnings cap to determine if any of the private practice income can be pensioned. The calculation is identical to the HSE pension calculation mentioned above and similar to the HSE example, Additional Voluntary Contributions can be made in respect of the GMS income subject to the usual limits.
Income Tax Relief Income tax relief is still available on contributions made personally to a pension. This may change, but right now relief is available on up to 40% of the contribution for a top rate tax payer, or 20% for a standard rate tax payer. For a higher rate tax payer, this is equivalent to the government topping up your net pension contribution by up to 67%!
Income Tax Rate
Pension Contribution Net of Income Tax Relief
Gross Pension Contribution
Increase from net cost to gross contribution
40%
€6,000
€10,000
66.7%
20%
€8,000
€10,000
25%
This document does not constitute advice. Independent advice should be sought at all times.
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