Nobody likes paying tax

However, we give more than we have too.

According to Fairtax project research from NUIG, Pensions in Ireland: The perspectives of Irish Citizens(2021),only a minority of people understand how the tax system is used to incentivise everyone to save for their retirement.

Government can only only afford to provide so much through the State Pension and there is growing pressure on this, which we will discuss at a future blog. They understand this causes problems for many if their standard of living is severely reduced on retirement. So they encourage saving, by allowing pension contributions to be a tax allowable expense. This means that any contribution is paid in gross. You do not give the Revenue your tax, it is saved for you to enjoy when you retire.

For example, a tax payer who pays tax at 40% can put €600 of his net income into his pension and the Revenue to put the tax they would have received in as well making a total contribution of €1,000.

To put this benefit into context, if you deposited €600 at 1% (pretty good at the moment) it would take you 52 years for it to grow to €1,000. This is what Revenue will give you immediately!

And any growth it generates until you retire will also be tax free! 

It is such a good and generous benefit that they have put a limit on how much you can avail of it. This is depending on you age and luckily they increase the allowance the closer you get to retirement.

Age	Contribution Limit (% of salary)
Under 30	15%
30 - 39	20%
40 - 49	25%
50 - 54	30%
55 - 59	35%
60+	40%

You should consider availing of as much of these allowances as you can afford. It can have a huge impact on the quality of your retirement years.

So don't just give your hard earned income to Revenue, get it working for you, so you can put your feet up and enjoy your retirement.

If your money works hard, you won't have too

Talk to your financial adviser on the best way to optimise these tax breaks.