Page 17 - Group Insurance and Retirement Benefit IC 83 E- Book

Retirement Benefits

Benefits payable in lump sum form on retirement (up to certain limits)are not subject to
income tax. Benefits payable in pension form are taxed under the PAYE system, just like

salary. However, they don‘t attract full PRSI contributions, but only the Health
Contribution. This is PRSI Class K1, currently 2% of the pension.

Death Benefits
Similarly, benefits which are allowed to be paid in lump sum form on the death of a

member are not subject to income tax, but those paid in pension form are taxable under
PAYE.. Death benefits are subject to Inheritance Tax. For the purpose of this tax, they

are treated as if they were an inheritance from the member who has died, so the question

of tax is governed by the relationship to the member of any beneficiary. Thus, a payment
to a husband or wife will be free from this tax. Payments to children and others will fall
under the various ―classes‖ set out in the Capital Acquisitions Tax Act.

Foreign Benefits
If you have pension benefits payable from a foreign country, the tax treatment of these

benefits when you receive them will vary. In some cases, they will already have been

subject to foreign tax and you may be able to get credit for this against your own tax
liability here. Benefits payable from the United Kingdom can be exempted from UK tax

but you must make proper application for this to be done. Ireland has double taxation
agreements with many countries, designed to ensure that you are not taxed twice on the

same benefits. In all cases where foreign pensions are payable, you should check with
your local tax office.

Do pensions increase after retirement?
Where payment of increases in pensions after they start to be paid is provided for in the

scheme rules, this is often called ―escalation‖. Some schemes do not provide any such

increases.Where increases are provided, the amount of the increase is often a defined
percentage figure, or may be related to a suitable index, such as the Consumer Price

Index. In some schemes, increases are provided purely at the trustees‘ discretion. This