Pensions: Regulation, Funding and Tax Relief
What to master
Pensions regulation covers State pensions, occupational defined benefit (DB) and defined contribution (DC) schemes, personal pensions, PRSAs, ARFs and annuities. Know the Pensions Authority’s role, trustee duties, the funding standard, disclosure requirements and the IORP framework. Tax relief is the exam’s core: employee and self-employed contributions attract relief within age-related percentages of earnings, subject to an earnings cap; employer contributions are not age-limited but total benefits are tested against the Standard Fund Threshold. Access age, tax-free lump-sum limits and ARF imputed distributions matter. A PRSA is a standardised personal retirement contract with portability and charge disclosure; a PRB is a buy-out bond. DB promises a benefit; DC promises a fund and investment risk sits with the member.
Traps
Applying employee age limits to employer contributions. Assuming all schemes allow access at 50. Confusing tax relief with a tax credit. Ignoring the Standard Fund Threshold and lifetime lump-sum limits. Forgetting that an ARF is not an annuity and carries investment risk. Treating a PRSA as identical to an occupational scheme. Missing that DB funding deficits can affect benefits and contributions.
Worked example
A 45-year-old earns €80,000. The 40–49 age band allows 25% of earnings, so maximum employee relief is €20,000, within the €115,000 earnings cap. An employer contribution is separate, but total benefits must remain within the Standard Fund Threshold.