Pensions
What a pension contribution really costs after tax relief
Last updated 16 October 2026
A contribution that comes off income taxed at 40% costs 60c in the euro; at 20% it costs 80c. Here's how to tell which applies, and where relief runs out.
Paying into a pension reduces your income tax, so it costs you less than the amount that goes in. How much less depends on which part of your income the contribution comes off.
40% or 20%
In 2026 a single person pays 20% income tax on the first €44,000 and 40% above it (the standard rate cut-off point). A contribution comes off the top of your income first, so only the part above the cut-off saves 40%. In 2027 the cut-off rises to €46,500 under Budget 2027, once Finance (No. 2) Bill 2026 is enacted.
| Pay | Paid into a pension | Income tax saved | Cost to you | Cost per €100 |
|---|---|---|---|---|
| €80,000 | €2,000.00 | €800.00 | €1,200.00 | €60.00 |
| €46,000 | €4,000.00 | €1,200.00 | €2,800.00 | €70.00 |
| €30,000 | €2,000.00 | €400.00 | €1,600.00 | €80.00 |
| €15,000 | €1,000.00 | €0.00 | €1,000.00 | €100.00 |
The €46,000 earner's €4,000 straddles the cut-off: €2,000 saves 40% and €2,000 saves 20%. The €15,000 earner saves nothing, because their tax credits already cover all their income tax.
USC and PRSI still apply
Relief is from income tax only. USC and PRSI are charged on your full pay, including the part you pay into a pension. Employer contributions are different: within the Revenue limits they aren't taxed as your income at all.
Where relief stops
Relief only applies up to your age-related limit, a share of earnings from 15% under 30 to 40% from 60, on earnings up to €115,000. Money paid in above that gets no relief that year.
What you get back at retirement
Pension income is taxed when you draw it. But up to 25% of a personal pension can usually be taken as a lump sum. The first €200,000 of lump sums in your lifetime is tax-free. If you get 40% relief going in and pay 20% on the income you draw, the difference is yours to keep.
To see the relief on your own extra contribution and what it could grow to, use the pension top-up calculator.
Work it out
Sources
- Revenue: Tax relief on pension contributions: overview (relief at your marginal rate, no USC or PRSI relief) (checked 20/10/2026)
- Revenue: Tax relief limits on pension contributions (age-related percentages, €115,000 earnings limit) (checked 25/10/2026)
- Revenue: Tax rates, bands and reliefs (checked 25/10/2026)
- Government of Ireland: Budget in Brief 2027 (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.