Ireland Retirement Hub

State Pension System

The State Pension (Contributory) is paid to those who have made sufficient PRSI (Pay Related Social Insurance) contributions during their working life. The maximum pension requires an average of 48 contributions per year since entering insurable employment, with reduced rates paid for lower average contributions down to a minimum of 520 contributions overall. The current State Pension age is 66, with increases to 67 and 68 previously legislated but now under review.

The State Pension (Non-Contributory) is a means-tested payment for those aged 66 and over who do not qualify for the contributory pension or receive reduced contributory pensions. The means test considers income, capital, and property excluding the family home, with weekly pension amounts reducing based on total assessable means.

Recent reforms have changed the calculation method for State Pension entitlement to address anomalies that disadvantaged those with broken contribution records. The Total Contributions Approach (TCA) being phased in bases entitlement on total contributions made rather than average annual contributions, benefiting those with career breaks for caring responsibilities or education.

Occupational and Auto-Enrollment Pensions

Ireland is introducing an auto-enrollment retirement savings system starting in 2024, requiring employers to automatically enroll eligible employees into pension schemes. The system will start with employee contributions of 1.5% of gross salary matched by employers and topped up by government contribution of 0.5%, with rates increasing gradually to 6% employee, 6% employer, and 2% government by the mature phase.

Existing occupational pension schemes include defined benefit and defined contribution arrangements, with most new schemes being defined contribution due to the costs and risks of DB schemes. Many employers operate group Personal Retirement Savings Accounts (PRSAs) or trust-based schemes, with contribution levels and investment options varying significantly between employers.

Tax relief on pension contributions follows standard age-related percentage limits of gross earnings: 15% for those under 30, rising to 40% for those aged 60 and over. The earnings cap for pension tax relief is €115,000, limiting the tax-relieved pension contribution for high earners. These limits apply across all pension savings including employer contributions, PRSAs, and RACs.

Personal Pensions and Retirement Planning

Personal Retirement Savings Accounts (PRSAs) are individual pension contracts offering flexibility and portability, particularly valuable for self-employed workers or employees without employer pension schemes. PRSAs must meet certain regulatory standards around charges, terms, and investment options, providing consumer protection and ensuring portability between employments.

Retirement Annuity Contracts (RACs) are personal pension policies available to self-employed individuals and employees not in occupational schemes. RACs offer similar tax advantages to PRSAs but may have less flexibility around charges and investment options. Both PRSAs and RACs are subject to the same age-related percentage limits for tax-relieved contributions.

At retirement, Irish pension savers can typically take up to 25% of the fund value as a tax-free lump sum (subject to a lifetime limit of €200,000 fully tax-free, with amounts between €200,000 and €500,000 taxed at 20%). The remaining fund must be used to provide retirement income through annuity purchase, Approved Retirement Fund (ARF) drawdown, or a combination, with ARFs subject to imputed distribution rules and income tax on withdrawals.

Official Resources

• Citizens Information Pensions
• Revenue Commissioners Pensions
• Pensions Authority