Payroll Processing > System Items > Pension

SimplePay has a built-in item to accommodate the special tax and reporting requirements related to pension, specifically Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs).

You can add the pension item by going to an employee’s profile and clicking on Add (next to Regular Inputs) > Pension. Then you 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.
    • “Percentage of Income”: if you select this, you can then also enter the % Income – Employee.

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
  • no Benefit in Kind (BIK) is calculated if there is no employer contribution

*Note: 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. Also, there is no relief from PRSI or USC.

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 and the Fixed Contribution by Employer.
    • “Percentage of Income”: if you select this, you can then also enter the % of Income – Employee 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
  • the employer’s contribution will constitute a Benefit in Kind (BIK) and will be added to the employee’s relevant earnings; however, PAYE, PRSI and USC will not be applied to the employer’s contribution

*Note: 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. Also, there is no relief from PRSI or USC.

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