Revenue published an article from Tax Briefing 74 dealing with tax relief for pension contributions and the application of the earnings limit. The article outlines the operation of the earnings limit where an individual has both employment earnings and self-employment income and contributes to both an occupational pension scheme and a personal pension plan.

The article notes that the maximum tax relief for an individual on pension contributions paid in the tax year is subject to two controls: firstly an age related percentage limit on the amount of net relevant earnings/remuneration, secondly an overall limit on the earnings which may be taken into account for the purpose of the age related percentage limit. Finance (No. 2) Act specifically reduced the earnings limit for 2009 to €150,000.

The article illustrates that where an individual contributes to a single pension product, the maximum tax relief on pension contributions is the age related percentage limit on the lower of the individual's net relevant earnings/remuneration and €150,000. Where an individual has two sources of income “dual income” and contributes to more than one pension product a single aggregate earnings limit of €150,000 applies.

Revenue's interpretation of the application of the pensions earnings limit in “dual income” situations does not allow for tax relief on contributions made to a personal pension plan where the individual's employment earnings exceeds the earnings limit and they are obliged to contribute to an occupational pension scheme.

Arising from discussions with Revenue on the utilisation of the pensions earnings limit, as illustrated by Tax Briefing 74 Example 2, Revenue have announced in Tax Briefing 79 that transitional arrangements will apply for 2008.

Tax Briefing 79 provides that where a personal pension contract was entered into before 7 September 2009 and the contribution:

• was actually paid in 2008, or
• was paid before 7 September 2009 in respect of 2008

then Revenue's approach as illustrated in Tax Briefing 74 will not apply. This means that taxpayers may claim relief for the above contributions on the same basis as in previous tax years. However contributions made on or after 7 September 2009, in respect of 2008 or at any time during the year in respect of 2009, will be treated as illustrated in Tax Briefing 74.

Tax Briefing 79 confirms that the approach outlined in Tax briefing 74 will not apply to years prior to 2008.

Tax Briefing 79 is reproduced below at 2.02.