Find out how much tax relief you and your employees can claim on pension contributions in Ireland, who qualifies for relief, and how to claim.
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Your employees in Ireland can claim tax relief on their pension contributions within certain limits to reduce their overall tax liability.
What are the limits?
How can your employees claim their tax relief?
And do you, as an employer, qualify for tax relief on contributions?
We’ll break it all down in this guide on how tax relief on pension contributions works in Ireland.
Your employees must fulfil the following eligibility criteria to qualify for tax relief in Ireland:
Schedule E refers to employment income, which includes salaries, wages and pensions. Whereas Schedule D refers to taxable business income, which includes profits from a trade (Case I) and self-employment income (Case II).
Can employers get tax relief on contributions to an employee’s pension fund?
In Ireland, employer contributions to pension schemes are tax-deductible against corporation tax and aren’t considered a taxable Benefit-in-Kind (BIK) for employees.
We’ll discuss this in detail in the "Do Employers Get Tax Relief on Pension Contributions?" section.
First, let’s understand how tax relief works.
When your employees contribute to a pension fund either independently or through you (employer), the contribution is deducted from their income before taxes are applied.
Both you and your employees can get tax relief on these contributions.
Tax relief is automatically applied to pensions paid via salary deduction. This can include occupational pensions, AVCs, PRSAs, etc.
However, for private pension contributions made independently (outside salary deductions), your employees must inform the Revenue to have tax relief applied.
The relief is based on your employee’s income and is applied at either the standard tax rate of 20% or the higher rate of 40% for both occupational and private pension schemes.
The rate applied depends on the highest rate of income tax your employees pay, also known as the marginal rate.
Example:
Suppose your employees pay tax at a 40% rate and make a lump sum pension contribution of €15,000 in the current tax year. In this case, they’ll get a tax rebate of €6000.
But remember:
Your employees’ pension contributions don't qualify for relief from Pay Related Social Insurance (PRSI) or Universal Social Charge (USC).
Moreover, there are limits on how much tax relief they can claim.
The amount of tax relief your employees can claim depends on the following limits:
Here is a closer look at each limit:
Disclaimer: This information is for general purposes only and should NOT be considered investment advice. Consult a qualified financial services advisor or pension provider for personalised guidance before making investment decisions.
Ireland’s Taxes Consolidation Act 1997 limits the total value of the tax-relieved pension savings individuals can draw in their lifetime.
Known as the Standard Fund Threshold, this limit is set at €2 million in 2025.
In other words, your employees can only claim income tax relief for a pension pot of up to €2 million.
The limit applies to pension benefits built through any of the following tax-relieved pension products:
If your employees’ pension fund capital exceeds the SFT (€2 million in 2025), they’ll be taxed 40% (chargeable excess tax) on any amount they withdraw beyond this limit.
They could stop contributing to their pension fund once it reaches the SFT to avoid paying this excess charge.
In September 2024, the Irish government announced plans to gradually increase the Standard Fund Threshold (SFT) limit from €2 million to €2.8 million between 2026 and 2029.
The SFT limit was initially set at €5 million and was lowered to €2.3 million in 2011 and then to €2 million from 1st January 2014. If a pension fund exceeded €2 million on 1st January 2014, the pensioner may be eligible for a Personal Fund Threshold (PFT) of up to €2.3 million.
The amount of pension contributions your employees can get relief on in a year is subject to two annual limits:
These limits also apply to self-employed people.
If you’re self-employed, earnings refer to your net annual earnings (earnings minus allowable expenses).
We’ll learn about these two limits in detail:
Here’s the maximum percentage of your employees’ annual earnings eligible for tax relief on pension contributions based on their age:
Example:
Consider your employee is 52 years old and earns €100,000 in 2025. They can contribute up to 30% of their earnings (i.e. €30,000) to their pension and still qualify for income tax relief.
In other words, the first €30,000 of your employee’s contributions won’t be taxed, lowering their taxable income.
Note: Professionals under 50 who usually retire earlier than the norm, like athletes, are eligible for a higher tax relief limit (30% of net earnings).
The ‘earnings limit’ is the maximum amount your employees can earn in a year and still be eligible for tax relief on their pension contributions.
As of 2025, the annual earnings limit for tax-relieved pension contributions is €115,000. It’s the maximum limit — your employees can contribute less if they want.
There’s no indication from the Irish government that this limit will increase in 2025 or later. This limit applies whether your employees are contributing to a single pension product or multiple schemes.
If your employees are contributing to a single pension product, their maximum tax-relieved contributions would be their relevant age-based percentage of the lower of:
Example:
Suppose your employee is 53, earning €300,000 in 2025 and contributing 20% (€60,000) to an occupational pension scheme.
(Remember, they can contribute up to 30% for their age bracket).
Their tax-relieved pension contributions would be limited to €34,500, i.e., 30% of the earning limit of €115,000.
What if your employee has multiple pension products?
In that case, the tax relief only applies to the source of income used to make pension contributions. If your employee has more than one income source, tax relief is only applied to the income from which contributions are made.
Irish tax laws allow your employees to take a part of their pension as a tax-free lump sum, subject to certain Revenue limits.
Your employees aged 50 or above can typically withdraw 25% of their pension as a tax-free lump sum (TFLS) subject to a lifetime limit of €200,000 in 2025. Any ‘excess lump sum’ amount above this 25% limit is taxable.
This applies to all pension schemes that transfer to an Approved Retirement Fund, including PRSA and occupational pension schemes.
Lump sum payments in Ireland are taxed as follows:
What if your employees are a member of an occupational pension scheme?
Occupational pension scheme members with 20 or more years of service may be eligible to claim a tax-free lump sum of up to 1.5 times their final salary if the amount exceeds the 25% limit above.
Claiming tax relief on pension contributions depends on an individual’s employment status.
Your employees can make a claim either through your payroll system or by using Revenue’s online service at www.ros.ie.
Let’s understand this in more detail.
For PAYE employees, pension contributions are typically deducted through payroll, with tax relief applied automatically at their marginal rate.
This means:
What if you don’t deduct pension contributions?
Your employees can manually claim tax relief by using the myAccount service on Revenue’s website (www.revenue.ie) when filing their income tax returns.
For self-employed workers, pension contributions must be claimed through the self-assessment system. They can:
Employer pension contributions are payments you (employer) make into your employee’s pension scheme. These contributions are tax-deductible against corporation tax, helping you reduce your tax liability.
Typically, when you provide a non-cash benefit to your employee, it’s treated as a Benefit-in-Kind (BiK) and is subject to tax.
However, employer pension contributions are an exception.
Your contributions to the following pension schemes on behalf of your employees aren’t treated as a BiK:
The advantage?
Since employer contributions to pension schemes aren’t considered a BiK, your employees don’t pay tax under the PAYE system or PRSI on the pension contributions made by you.
Consequently, these contributions aren’t subject to the total earning and age-based limitations we discussed earlier.
In Ireland, employer contributions to your employees’ pension schemes can be offset against corporation tax, reducing your costs by 12.5%.
This applies to contributions made to approved pension schemes, and there is no upper limit on tax relief for these contributions.
But here’s the thing:
Setting up and managing employee retirement benefit plans can involve extensive paperwork and substantial administrative costs.
Want a simple and cost-effective way to set up occupational pensions?
A trusted platform like Kota allows you to set up and enrol your employees in a compliant occupational pension plan with just a few clicks.
Kota lets you:
So what are you waiting for?
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Here are answers to some commonly asked questions about Irish tax relief and pension contributions:
Your employees can get tax relief on Additional Voluntary Contributions (AVCs) made to Personal Retirement Savings Accounts (PRSAs).
The amount of relief depends on age-related percentage limits, which are calculated based on their income from employment. These limits include any regular pension contributions they've already made through their job.
Your employees can claim backdated relief for the 2024 tax year by making a lump sum of Additional Voluntary Contributions (AVCs) on or before 31st October 2025.
Most people can cash in their pension when they turn 50 and still be eligible to claim a 25% tax-free lump sum amount.
But there’s a catch:
If your employees are members of an occupational pension scheme, they must no longer work for the employer that set up the pension scheme.
Members of PRSA or defined contribution schemes can also claim their pension early if they’re unable to work due to sickness and have valid medical evidence.
However, your employees will get less money than if they worked till the normal retirement age.
Your employees don’t have to pay Capital Gains Tax (CGT) on the growth of their pension fund. This means any gains made within the fund are tax-free.
However, when they withdraw money from their pension, either as a lump sum or regular payments, they may have to pay income tax, depending on the amount they withdraw.
The following pension incomes are exempt from taxes in Ireland:
Tax relief is an excellent incentive for employees and employers to contribute towards pensions.
For your employees, it reduces their income tax, which is especially beneficial for higher-rate taxpayers. Meanwhile, you benefit from corporation tax relief on employer contributions.
Stay updated with the latest tax relief limits on pension contributions, and refer to this detailed guide to maximise tax relief benefits.
Trevor Gardiner QFA, RPA, APA in Insurance. With 23 years of experience in Financial Services, I have a strong passion for Health Insurance and Pensions.
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