Personal pensions

Personal Pensions


A personal pension, is a pension plan issued by a life insurance company to an individual. There are no employer contributions made to the pension plan and as the name suggests, the plan is owned by the person who contributes to it. This type of pension product is most suitable for the self employed.

Personal pension plans may be suitable for employees who are not in pensionable employment (i.e. not included in an occupational pension scheme by their employer). However depending on a number of factors, a PRSA may be more suited to an employed individual. See the PRSA page for comparison to personal pensions.

Tax Relief


Contributions made to a personal pension plan are tax deductible for the individual against net relevant earnings. The current maximum limits for income tax relief are as follows:

AgeMaximum Tax relief
As % of Earnings (NRE)
< 3015%
30 – 3920%
40 – 4925%
50 – 5430%
55 – 5935%
> 6040%

 

The limits above are capped to a maximum earnings ceiling of €115,000 for 2011. In addition, for some professional sportspeople, a higher rate applies regardless of age.

It is possible to backdate personal pension plan contributions paid in the current tax year, to the previous tax year, once the contribution has been made before Oct 31st. It also possible to carry forward any excess contribution made, in order to gain tax relief in future years.

What Can I Invest my Pension in?


There is a wide selection of potential investments for pension investment. As the pension is owned by the individual, you have control over your investment strategy, which cannot be said for members of occupational schemes who are limited in their investment choice. Property can be included as an investment asset within personal pension plans. This includes both direct property units and property funds.

The personal pension plan is issued & administered by an insurance company. Concentrating contributions to one personal pension plan may give a higher allocation rate and reduction in charges. It may also be desirable to have a number of plans with different providers if there are a number of investment products which the pension investor wishes to invest in.