State pensions have long since been recognised as not being adequate to provide sufficient income for you when you retire. James Stephens Financial Services will help provide you with the most suitable supplementary pension arrangements to ensure you enjoy a comfortable lifestyle during your retirement Pensions are long term savings plans which provide a fund in retirement and provide for an income for life. The main differences between pensions and savings plans is that under pension plans you receive tax relief on your contributions, tax free investment growth and tax free cash at retirement.

An employer or occupational pension plan is one that is set up by an employer to provide pension and other benefits for employees.

Trustees are appointed to oversee the Rules of the Pension Scheme Employees are eligible for full income tax and PRSI relief on their pension contributions up to certain limits set out by the Revenue. Upon agreement with you and your employer your contributions could at least be matched by your employer, e.g. if you make a 5% salary contribution, your employer will also make a 5% contribution however the employer is obliged to make a pension scheme available through salary deduction.

The current Maximum tax relief limits are:

Age attained Max contribution as % of NRE

  • Up to age 29 15%
  • 30-39 20%
  • 40-49 25%
  • 50-54 30%
  • 55-59 35%
  • 60+ 40%

What happens when I retire?

If you retire early – if the pension fund trustees or your employer agrees, you may be able to retire from the age of 50 onwards for a limited company. Although, you must remember that your pension will normally be much lower than if you were to continue to make contributions up to your normal retirement age of between 60 and 70 (normal retirement ages) which is determined in the scheme rules at the outset. 

You can typically take your benefits in two separate parts when you retire as an employee from your employer’s pension plan:

  • As a tax free lump sum
  • As a pension for life subject to income tax (See annuities)


The rules of your employer’s plan will determine the amount you can take as a tax-free lump sum. You may take up to a maximum of 1.5 times your final salary subject to having the required pensionable service or use your entire fund to buy a pension which will provide a regular income for the rest of your life. It is normally sensible to take the largest lump sum you can tax-free.

If you buy an annuity/guaranteed pension income, on the other hand, it will be subject to income tax. Getting the lump sum now, of course, means that you are free to invest or spend as you want. It is important to take time to give due consideration to the knock-on effects of the choice you make as, in some cases, the choice of taking a lump sum can reduce your annual pension. Contact James Stephens Financial Services to discuss your options.

Also James Stephens Financial Services will research the market for the most suitable pension and investment options available to meet your retirement needs and objectives.

What are Additional Voluntary Contributions?

You may well decide that you wish to save more than the minimum so that you can enhance the size of your pension fund. These extra contributions are called AVCs, or ‘additional voluntary contributions’. Only an existing member of an occupational pension scheme can make AVCs. Contributions are made by the member in addition to a compulsory contribution payable under their main scheme.

The member is only eligible to continue making AVCs while they are an active member of the main occupational scheme linked to that employment. AVCs also qualify for full income tax and PRSI relief subject to the same personal limits mentioned earlier.

You can make an AVC in one of two ways; either by way of making an AVC into a AVC scheme set up by your employer under Trust and governed by the rules of the main scheme or through a PRSA AVC in your own name.

James Stephens Financial Services will discuss the most suitable option for you.

Will AVCs improve my options at retirement?

One of the most important functions an AVC fund can perform for you is to provide extra tax free cash in retirement for you. This is particularly relevant for Public Sector employees where the rules of the main scheme don’t allow certain earnings as ‘pensionable’, for example Over-time. Or if the employee does not have enough service to get the maximum Revenue tax free lump sum in retirement. For example in some Public Sector Schemes the employee may have to have 30 or 40 years service to get the full 1.5 times final pensionable earnings in order to get the Revenue Maximum. Under Revenue Rules you are entitled take 1.5 times your final pensionable salary as a tax free lump sum if you have 20 years pensionable service and your AVC fund can help you achieve this goal! You should discuss your options in more detail with James Stephens Financial Services for advice.

You must normally take the benefits when you retire of any AVCs you have paid into your employer’s pension plan or into a separate Personal Retirement Savings Account. It is possible that you could take part, or all, of your AVC fund as a tax-free lump sum. Any money left in your AVC fund, can be used to:

  • increase your basic pension
  • transfer into an Approved Retirement fund or Approved Minimum Retirement Fund (See ARF/AMRF Section)
  • take out in the form of a lump sum but this will be subject to income tax