Pension Tips for Self-Employed
& PAYE Workers
askpaul explains about pensions for self-employed & PAYE workers:
So when it comes to pension contracts, if you are self-employed or you’re a PAYE worker, which means you’re working in a company that hasn’t got access to an occupational pension scheme, you have a couple of options when it comes to a pension contract.
One of those contracts is a personal retirement savings account, or otherwise known as a PRSA. A PRSA is very similar to a personal pension plan. If you’re in that bracket, that’s what you need to invest in. That’s what you need to have your pension in.
In those two pensions, you have a couple of options. If you’re self-employed, you just put it through your own bank account, and you’re putting €200 per month through let’s say, when you get to your tax return at the end of the financial year, 30th of October, your accountant will allow the contribution into your pension off your tax return and reduce your tax bill. This is a no-brainer and really, really simple to understand.
Now, if you’re not in an occupational pension plan, and you’re in an employed situation where you work for somebody that doesn’t provide an occupational pension plan, you can set up PRSA or in fairness, a personal pension plan either. Either or will go through your own personal bank account.
Employers are obliged to put your PRSA through payroll, but let’s assume that you don’t want to ask an employer that question just yet, and you’re going to put it through your own payroll. I’m going to talk you through how tax is calculated and how it works out for you.
So, if you decide to contribute €100 per month, and you’re on the higher rate of income tax, you’re going to get 40% back. All that happens is the €100 comes out from your personal bank account and your tax credits are adjusted, which means you will get an extra €40 in your wages that month. So, overall €100 goes out, an extra €40 comes in. The net cost to you in that month is €60 towards your pension. Very, very simple to understand.
Depending on which contract you go for, you can invest in different things. I’m going to do a video below this one in relation to investments and what you should be looking for. There’s not really much difference between a PRSA and a personal pension. In fact, when PRSA’s were introduced in the early 2000s, they were supposed to get rid of personal retirement accounts or personal pensions, but they didn’t. So you just have two choices now.
If you’re worried or you want advice around which one suits you best, please don’t hesitate to get in contact with me or the team and we’ll take you through both options.
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