In other words if your income levels bring you into the higher income tax bracket then you get tax relief at that rate. Likewise, if your income level means that you are paying tax at the lower rate only, then this is the rate at which you get the tax relief.
It would be nice if you could save unlimited amounts into your personal pension plan and get tax relief, but because the tax breaks are so good, the Government puts limits on them. These limits are very generous and are based on your income and age and they are subject to a maximum earnings limit.
1. Income Tax Relief
Income Tax Relief (Subject to Revenue Limits) is provided at your marginal rate of tax on contributions. Therefore, if you are top rate tax payer for every €4 you get €2.67. This compares favourably with the now redundant SSIA of for every €4 you got €1.
2. No DIRT or CGT
As your contributions accumulate in your fund there is no tax on any growth i.e no DIRT or CGT.
In addition, the austerity levy on pension funds no longer apply from 2016.
3. Tax Free Cash Option on Retirement
Next, is the advantage of the tax free cash option on retirement, capped at €200,000.
4. Approved Retirement Fund
The fourth tax advantage is the Approved Retirement Fund (ARF) as a post retirement tax planning tool which allows you minimise or perhaps even eliminate your tax in retirement.
5. Tax Free Death Benefits and Capital Acquisition Tax
The final tax advantage to highlight is the Tax Free Death Benefits, Capital Acquisition Tax may apply depending on the beneficiary and the thresholds.