Types of Contributions
A Group Pension can accept 3 types of Contributions:
Employer Contributions: This is the amount that the Company will contribute to the company pension. These are generally made on a monthly basis as a percentage of the Employee’s salary
Employee Contributions are monthly %-based amounts paid into the Pension Scheme by the individual employee. Employee Contributions benefit from tax-relief at source, giving immediate tax relief of either 20% (for Standard Rate tax-payers) or 40% (Marginal Rate tax-payers)
Additional Voluntary Contributions (AVCs) are very similar to Employee contributions, but they are simply in additional to what the standard percentage employee contribution. AVCs also benefit from Tax Relief at course
An example of all 3 of these would be a Company that agrees to pay a pension contribution of 5% of an employee’s salary (Employer Contribution) on condition that the individual employee also contributes 5% of salary (Employee Contribution). If that Employee were aged between 40-49, he or she may also decide to contribute an additional 20% of salary as an AVC to the scheme, to get up to 25% of total salary (subject to an earnings ceiling of €115,000)