Pension

SimplePay has built-in items to accommodate the special tax and reporting requirements related to pension, specifically Retirement Annuity Contracts (RACs), Personal Retirement Savings Accounts (PRSAs), Pan-European Pension Product (PEPP) and Retirement Benefit Scheme (RBS).

You can add these pension items by going to an employee’s profile and clicking on Add (next to Regular Inputs) > Pension. Then select the Pension type from the drop-down menu.

Retirement Annuity Contract (RAC)¶

RACs are more commonly known as a private pension or a personal pension. Self-employed people or employees who do not have access to an occupational pension scheme may opt to take out an RAC with a pension provider.

An individual must have a source of relevant earnings to take out an RAC. Relevant earnings include earnings from a non-pensionable employment or income from a trade or profession.

After you select “RAC” as the Pension type, you can complete the other fields:

Pension Calculation: select “Fixed Amount” or “Percentage of Income” from the drop-down menu, depending on how the contribution is determined.
- “Fixed Amount”: if you select this, you can then also enter the Fixed Contribution by Employee and the Fixed AVC by Employee.
- “Percentage of Income”: if you select this, you can then also enter the % Income – Employee and the % Income of income – Employee AVC

The effects of these inputs are the following:

There will be a nett pay deduction to the value of the employee’s contribution.
The employee’s contribution will be deducted from their gross pay, before PAYE is calculated; therefore, the employee will obtain tax relief on pension contributions at their marginal rate.
There will be a fixed employee contribution to AVC.
There is no relief from PRSI or USC for employee contributions.
As the RAC has no employer contribution, there is no Benefit in Kind (BIK) calculated.

You must ensure that the RAC is Revenue approved and that they have a “nett pay” certificate in order to use this system item and apply the taxable income deduction to an employee’s payslip. If you do not have the relevant certificate, you must set up a custom item for the contributions rather than use this system item, and the tax relief will then be applied by Revenue on assessment.

Personal Retirement Savings Account (PRSA)¶

A Personal Retirement Savings Account (PRSA) is a savings contract between an individual and an authorised PRSA provider and operates in a similar manner to a Defined Contribution pension scheme. This means that the benefits are determined by the value of the account at retirement.

PRSAs are designed to enable people, especially employees who are not members of an occupational pension scheme, to save for retirement. They are available to those who are employed, self-employed, unemployed and homemakers / carers.

After you select “PRSA” as the Pension type, you can complete the other fields:

Pension Calculation: select “Fixed Amount” or “Percentage of Income” from the drop-down menu, depending on how the contribution is determined.
- “Fixed Amount”: if you select this, you can then also enter the Fixed Contribution by Employee; Fixed AVC by Employee and the Fixed Contribution by Employer
- “Percentage of Income”: if you select this, you can then also enter the % of Income – Employee; % of Income – Employee AVC and the % of Income – Employer.

The effects of these inputs are the following:

There will be a nett pay deduction to the value of the employee’s contribution.
The total contribution by the employee and the employer will be deducted from the employee’s gross pay, before PAYE is calculated; therefore, the employee will obtain tax relief on pension contributions at their marginal rate.
There is no relief from PRSI or USC for employee contributions.
The AVC contribution will be deducted from the employee’s salary.

The Employers contribution to a PRSA should:

NOT form part of an employee’s gross pay, and
NOT be treated as a BIK

Please note: If your employee makes an AVC contribution, please ensure that the combined contribution amounts do not exceed the age-based percentage limits and earning limits.

Pan-European Pension Product (PEPP)¶

The Pan-European Personal Pension Product (PEPP) is a voluntary personal pension scheme that offers EU citizens a new option to save for retirement. The PEPP pension scheme complements existing national pension regimes, including those in Ireland, and is unique in that it allows members to continue contributing to the scheme throughout the EU, even if they move between countries. PEPP works similarly to a PRSA.

After you select “PEPP” as the Pension type, you can complete the other fields:

Pension Calculation: select “Fixed Amount” or “Percentage of Income” from the drop-down menu, depending on how the contribution is determined.
- “Fixed Amount”: if you select this, you can then also enter the Fixed Contribution by Employee; Fixed AVC by Employee and the Fixed Contribution by Employer
- “Percentage of Income”: if you select this, you can then also enter the % of Income – Employee; % of Income – Employee AVC and the % of Income – Employer.

Please note: The PEPP built-in item will be effective 1 January 2024. Contributions that need to be made to PEPPs before 1 January 2024 should be recorded using the existing PRSA functionality. This is because the tax treatment of the PRSA and PEPP are identical. To accomplish this on SimplePay, please follow the guidelines provided under the Personal Retirement Savings Account (PRSA) section above.

The effects of these inputs are the following:

There will be a nett pay deduction to the value of the employee’s contribution.
The employee’s contribution will be deducted from their gross pay, before PAYE is calculated; therefore, the employee will obtain tax relief on pension contributions at their marginal rate.
PEPP is not a Benefit in Kind (BIK) and will not increase the employee’s Gross Pay.
The employer’s contribution to a PEPP is subject to relief in that no additional PRSI and USC are calculated on these; however, there is no relief from USC or PRSI for the employee’s contribution.
The employee’s contribution to the AVC will be deducted from their gross pay, before PAYE is calculated. Therefore employees will be granted tax relief, i.e. it is a Taxable Income Deduction. It will not be deducted from their gross pay when calculating their pay for USC and PRSI.

Please note: If your employee makes an AVC contribution, please ensure that the combined contribution amounts do not exceed the age-based percentage limits and earning limits.

Retirement Benefit Scheme (RBS)¶

A Retirement Benefit Scheme (RBS) is also known as an Occupational Pension Scheme (OPS) or a company pension scheme, as it is company-wide pension scheme offered to employees. This differs from PRSA and RAC, which are personal pension schemes that employees will operate if there is no RBS offered by their company.

After you select “RBS” as the Pension type, you can complete the other fields:

Pension Calculation: select “Fixed Amount” or “Percentage of Income” from the drop-down menu, depending on how the contribution is determined.
- “Fixed Amount”: if you select this, you can then also enter the Fixed Contribution by Employee, the Fixed AVC by Employee and the Fixed Contribution by Employer.
- “Percentage of Income”: if you select this, you can then also enter the % of Income – Employee, % of Income – Employee AVC and the % of Income – Employer. There will also be a checkbox for Specify pensionable income items. If you leave this box unchecked, the percentages entered will be applied to all income. If you select this checkbox, you will need to specify which income items the percentage must be applied to.

The effects of these inputs are the following:

There will be a nett pay deduction to the value of the employee’s contribution.
An employer contribution to an RBS is not a Benefit in Kind (BIK) and will not increase the employee’s Gross Pay.
The employee’s contribution to an RBS will be deducted from their gross pay, before PAYE is calculated. Therefore employees will be granted tax relief, i.e. it is a Taxable Income Deduction.
The employer’s contribution to an RBS is subject to relief in that no additional PRSI and USC are calculated on these; however, there is no relief from USC or PRSI for the employee’s contribution.
The employee’s contribution to the AVC will be deducted from their gross pay, before PAYE is calculated. Therefore employees will be granted tax relief, i.e. it is a Taxable Income Deduction. It will not be deducted from their gross pay when calculating their pay for USC and PRSI.

Tax Relief¶

The tax relief is subject to certain age-related limits; however, the system does not currently test for these limits since they are not reached very often. Please also note that all pension fund contributions count towards the calculation of this limit, including additional voluntary contributions (AVCs) and special contributions (once-off contributions). You must therefore ensure that you are monitoring this limit for all employees to ensure that the ceiling has not been reached and that you are not incorrectly reducing their PAYE payable. This includes a limit applied to the amount of regular and AVC contributions that gain tax relief.