The question may be asked, what is all the fuss about pensions at this time of year? The answer is simple. By making a contribution into your pension before October 31, or November 15 for those who make tax returns online, you will qualify for tax relief on the amount you contribute, thus reducing the net cost to you.
Example: Assuming you were paying sufficient tax at the top rate, you can effectively put €1,000 into your pension at a cost of €590, being a self employed individual. There would be an additional saving of €80, ie, PRSI and levy if you were making this contribution by way of an AVC (additional voluntary contribution ) to a company pension plan or a public sector scheme. This contribution can be back dated against your 2010 income provided you make your contribution and submit your claim before the relevant cut-off dates.
Additional benefits with your pension also include:
Tax free growth on the fund up to retirement.
Tax free lump sum at retirement of 25 per cent of the value of the fund for self employed and up to one and a half times final salary for scheme members.
Your pension is one of the few options left to reduce your tax bill so take advantage of it while you can.
Eddie Melvin is an independent broker and can be contacted at Melvin Financial Services, Pearse Street, Ballina, Co Mayo.
Email: [email protected]