Pension Contributions & Income Tax – Maximize Your Relief

Pension Contributions & Income Tax – Maximize Your Relief in Ireland 2025

In Ireland, pension contributions are not just a way to prepare for retirement — they are also one of the most powerful and legitimate tools to reduce your income tax bill. The Irish tax system offers generous pension tax relief on contributions to occupational pensions, PRSAs (Personal Retirement Savings Accounts), and Additional Voluntary Contributions (AVCs).

If you’re paying Income Tax at 20% or 40%, these reliefs can significantly increase your take-home pay while boosting your retirement savings. In this guide, we’ll cover how pension contribution tax relief works in Ireland, the 2025 limits, and proven strategies to maximize your pension tax savings.

How Pension Contributions Reduce Your Income Tax

Pension contributions qualify for tax relief at your highest marginal rate:

• Standard rate taxpayers (20%) – Every €100 you contribute costs you only €80 after tax relief.
• Higher rate taxpayers (40%) – Every €100 you contribute costs you just €60 after tax relief.

Example:
If you earn €70,000 and contribute €10,000 to your pension:

• At the 40% tax rate, you reduce your income tax by €4,000.
• Your actual net cost is €6,000 for a €10,000 boost to your retirement fund.

2025 Pension Contribution Limits Based on Age

Revenue limits the percentage of your gross earnings (up to an earnings cap of €115,000) that can qualify for tax relief. In 2025, the limits are:

• Under 30 years – 15% of earnings
• 30–39 years – 20% of earnings
• 40–49 years – 25% of earnings
• 50–54 years – 30% of earnings
• 55–59 years – 35% of earnings
• 60 years and over – 40% of earnings

Note: These limits include only include employee contributions. Employer’s contributions to your pension scheme do not impact the amount that an employee can contribute.

Additional Voluntary Contributions (AVCs)

If you’re in an occupational pension scheme, you can make Additional Voluntary Contributions to increase your retirement benefits and maximise your tax relief.

Benefits of AVCs:

• AVCs qualify for the same tax relief rates as standard pension contributions.
• They can be used to boost your tax-free lump sum at retirement.
• They are especially useful if you joined your pension scheme later in your career and want to catch up.

Example:
If you are 45 and your standard contributions are only 10% of earnings, you can top up with AVCs to bring your total up to the 25% limit for your age bracket.

Use our AVC calculator to estimate your maximum tax deductible AVC or check out our other tools here.

Final Word

Pension contributions in Ireland are one of the few ways to directly reduce your income tax bill while building long-term financial security. By knowing the 2025 pension tax relief limits, using AVCs, and timing contributions for maximum effect, you can keep more of your income now and enjoy a larger retirement fund later.