Pensions in Ireland

Pensions in Ireland

There are different types of pensions that you may be entitled to on retirement from employment in Ireland.

Depending on how many social insurance contributions you made or depending on your financial situation you may be entitled to a pension from the state.

Many employers operate pension schemes for their employees, these are called Occupational Pensions.

You can also organise your own personal pension account.

State Pensions

There are 2 different types of state pension: one is based on the amount of social insurance contributions you have paid, State Pension – (Contributory) and one is based on a means test, State Pension – (Non-Contributory).

State Pension (Contributory)

The Contributory State Pension is payable to people in Ireland from the age of 66 who have enough social insurance contributions. It is not means tested and you may also have income. You may have to pay some tax on this pension.

State Pension (Non-contributory)

The Non-Contributory State Pension is a means-tested payment for people aged 66 or over who do not qualify for the Contributory State Pension based on their social insurance record.

Occupational Pension Schemes

In general, large employers in Ireland have occupational pension schemes, but many smaller employers throughout the country do not. Each pension scheme has its own set of rules. Pension schemes nationally are generally regulated by the Pensions Board.

Special schemes called PRSAs were introduced to be used instead of occupational pension schemes by employers who do not wish to sponsor such schemes

PRSA (Personal Retirement Savings Account)

A PRSA (Personal Retirement Savings Account) is a low-cost, easy-access private pension savings account. It is designed to allow you save for retirement. You are entitled to invest in a PRSA regardless of your employment status. PRSAs are transferable from job to job and they are available from a variety of providers.

PRSAs are provided by private banks or life assurance companies.

Pension Regulation

Pensions are regulated by The Pensions Authority.

The Pensions Authority

Verschoyle House,

28-30 Lower Mount Street,

Dublin 2.

Telephone: 01 6131900

Lo-call: 1890 656 565

Website: www.pensionsauthority.ie

Taxation of Pensions

In general, all income arising from pensions in Ireland is subject to taxation. Occupational pensions are taxable. Many pensioners do not actually have to pay tax, because their income is too low.

Occupational pensions are subject to tax under the PAYE system (the 'Pay-As-You-Earn' System) so the process is the same as that applied when you were being paid your salary. If you have both an occupational pension and a social welfare pension, you may have to pay tax on both.

Occupational pensions are not subject to social insurance contributions (PRSI) but if you are aged under 66, you may have to pay PRSI on other income. Occupational pensions are subject to the Universal Social Charge (USC).

Double Taxation Agreements

Double Taxation Agreements generally make a distinction between pensions payable by governments to former employees and pensions payable by private employers. There are some variations between the agreements and not all agreements make this distinction and they vary in other ways so you would need to check how exactly you are affected.

Most of them provide that pensions for non-governmental employees are taxed in the country of residence. So, if you are living in Ireland and getting an occupational pension from another country, you should generally receive it gross and then pay Irish tax on it.

The opposite is the case for pensions for former Government employees - generally they are taxable only in the country where they are paid. So, if you are a former employee of the US government now living in Ireland, you pay tax on your occupational pension in the USA only. In some cases, this applies to pensions from local authorities or other political sub-divisions - again, the particular agreement needs to be checked.

Pay-related Social Insurance (PRSI)

If you are over 66, you are not liable to pay PRSI contributions at all. Find out more about social insurance in Ireland.

If you are under 66 and are employed or self-employed, you pay PRSI on your income from that employment or self-employment. You do not pay it on your occupational or social welfare pension.

Universal Social Charge (USC)

The Universal Social Charge (USC) replaced the health contribution and the income levy from 1 January 2011. All social welfare payments including pensions are exempt from the USC. However, occupational pensions are subject to the USC. The rate you pay varies depending on your age and on whether you hold a full medical card. See our document on the Universal Social Charge for more information.