As a pension saver you can avail of a range of tax incentives that you simply won’t get with any other savings product. Many people are leaving their money sitting in low earning interest accounts that could be actually be costing them money when inflation is taken into account. There are better options to make your money work harder for you while benefiting from some generous tax incentives when planning for retirement .
As an Irish taxpayer you are entitled to claim generous tax relief on payments into your pension plan. If you are a higher rate taxpayer, for every €1 you save, you can claim back up to 40% in tax relief. For example, if you make a monthly contribution of €200, it will actually only cost you €120 after tax relief. If you pay tax at the standard rate, you can also benefit from 20% tax relief.
Unlike other savings plans, any growth on the investment of your pension contributions is not subject to tax. You pay DIRT of 41% on any interest earned on bank accounts and exit tax of 41% on any gains made on most investments. You pay 0% tax on any growth within your retirement fund.
On reaching retirement, you may be able to take part of your retirement fund tax free, subject to a limit of €200,000. Where the retirement lump sum is greater than €200,000, the next €300,000 is only taxed at the standard rate (currently 20%). This very attractive benefit is not available on any other savings plan.
You may be able to take a regular income in retirement, without paying income tax. This exemption from income tax is subject to a maximum drawdown of €18,000 a year for a single person or €36,000 for a married couple under current income tax rules.
A Financial Broker can help you put a plan in place that helps you make the most of the tax advantages available to you. For independent expert advice speak with Ark Finance today. We have been working with clients for over 10 years to help them with their future financial plans.