Saving on Taxes with Pension Contributions

Peavoy Financial Planning Smart Financial Move

Make the most of your Financial Resources

When it comes to managing your finances, one aspect that often goes overlooked are the potential tax benefits of pension contributions. Saving for retirement is not just about securing your future, it can also provide immediate tax advantages. In this post, we’ll explore how you can save on tax by making pension contributions and why it’s a smart financial move.

Understanding Pension Contributions

Pension contributions involve setting aside a portion of your income today, specifically for your retirement. These contributions are designed to grow over time through investments, ensuring you have a comfortable nest egg when you retire.

Tax Benefits of Pension Contributions

  • Tax Deductions: One of the primary advantages of contributing to a pension plan, is that it can reduce your taxable income.  Personal contributions to pensions, up to an age related percentage of earnings limit, are tax-deductible. This means that the money you contribute to your pension plan, is deducted from your total taxable income for the year, which potentially lowers the amount of taxes you owe.
  • Tax Free Growth: Pension contributions not only reduce your taxable income in the present, but your pension investments can grow tax-free This tax-free compounding growth can significantly boost your retirement savings over time.
  • Lower Tax Brackets: By reducing your taxable income through pension contributions, you may also find yourself having no income, or a reduced level of income being taxed in the higher tax bracket (ie: 40%). This would mean that a larger percentage of your taxable income is in the lower tax bracket and is taxed at the lower income tax rate of 20%
  • Employer Contributions: Many employers offer matching contributions to their employees’ pension plans. This means that for every euro you contribute, your employer may match a certain percentage, effectively doubling your retirement savings. These employer contributions are not subject to income tax.
  • Tax Free Lump Sum: Pension plans in Ireland offer tax benefits at the back end. At pension drawdown you are entitled to a certain percentage of your fund value in lump sum format, up to a tax free maximum of €200,000.

Strategies to Maximise Tax Savings

  • Maximise Contributions: Contribute the maximum allowed amount to your pension plan each year. This not only boosts your retirement savings but reduces the tax you will have to pay.
  • Take Advantage of Catch-Up Contributions: If you do an online tax return you have until the 15th November 2023 to backdate a personal pension contribution or make an AVC against the tax year 2022. The benefit of this may be two fold. It will reduce your final tax bill for 2022 and your preliminary tax bill for 2023. This can be a powerful tool for accelerating your retirement savings and reducing your taxable income.
  • Diversify Your Retirement Accounts: Consider using a number of PRSA accounts for a phased drawdown at retirement to optimise your tax strategy. Diversifying your retirement savings can provide flexibility for some in managing their tax liability in retirement.


Saving for retirement is not only about securing your financial future but also about optimising your tax situation today. Pension contributions offer a range of tax benefits, from immediate income tax deductions, to tax-free growth and tax-free withdrawals in retirement. By understanding these benefits and implementing smart savings strategies, you can save on taxes while building a robust retirement fund. Consulting a financial advisor can help you make the most of these tax-saving opportunities and ensure a comfortable retirement.

To explore this topic further, please do make contact with me by phone on 087-2902206 or alternatively by e-mail on

David Peavoy BA, QFA, LIAP is a Director of Peavoy Financial Planning Limited whose practice is based in Office 5b, Portlaoise Enterprise Centre, Clonminam Business Park, Portlaoise, Co Laois.

Peavoy Financial Planning Limited is regulated by the Central Bank of Ireland

Disclaimer: All data and information provided within this blog is for information purposes only. It should not be taken as specific advice for your situation. Peavoy Financial Planning Limited makes no representations as to the accuracy. completeness, or suitability of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its use


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