Invest Christmas bonus into pension, say Association of Chartered Certified Accountants
The Association of Chartered Certified Accountants have warned that those who don't invest their Christmas bonus into their pension risk losing a large portion of it to taxation.
The ACCA say that Christmas bonuses, which qualify for tax relief when invested as a pension contribution, are a good way for people to catch up with their retirement fund.
According to Aidan Clifford, Technical Director ACCA Ireland, a 30-year-old single person was to invest a €1,000 bonus in a pension, on current rates inclusive of the applicable tax relief, it would mature at €8,500 by retirement age.
However, should this bonus be treated as income it would be subject to the full rigour of the relevant tax band, be that 20% or 40%.
“There is looming crisis in Irish society regarding pensions with more and more people not preparing for retirement and current government plans for an auto-enrolment scheme in 2022 lacking the substance and detail to act as a catalyst to address people’s long-term shortfalls," Mr Clifford said.
"It is also unhelpful in the current environment to be looking at cutting pension tax relief, if anything the government should be incentivising additional tax contributions particularly within the private sector which are worth 80% less than those in the public sector," he added.
It is for these reasons that we are encouraging people to act now.
