The government really wants you to save for your retirement. So they offer three great tax advantages with the money you put into your pension.
Moneycube thinks these are worth shouting about!
Tax relief on contributions
Firstly, you get income tax relief on the money you put in. If you’re a 40% rate taxpayer, when you put in €60, the taxman adds €40. (That’s the €40 you’d normally be paying in tax on €100 of earnings).
Your cash grows tax-free
Secondly, the money in your pension pot accumulates tax-free. There’s no income tax, capital gains tax, deposit interest retention tax or capital gains tax on your money while it works away on your behalf. That’s a lot of tax to avoid!
Tax-free lump sum belter
Lastly, most people can take a tax-free lump sum of up to 25% of their pension pot when they retire. That lump sum can be as much as €200,000. It’s probably the only time in your life you’ll collect anything close to that amount without the taxman having a piece.