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If you receive an annual bonus, directing part of it into your pension via Additional Voluntary Contributions (AVCs) can be one of the most tax-efficient moves available. This guide explains how bonus pension sacrifice works under Irish Revenue rules, the age-related limits that apply, and how your employer’s payroll setup affects the outcome.
When you elect to sacrifice part of your bonus into your pension, that amount bypasses PAYE, USC and PRSI in most payroll arrangements. This means every €1 sacrificed could save you up to 52¢ in combined tax and levies if you are a higher-rate payer.
The sacrificed amount is treated as an employer pension contribution in many schemes, so it also avoids employer PRSI (11.05%). Some employers pass part of this saving back to employees, though this is scheme-dependent.
The critical distinction is whether your payroll applies USC and PRSI on the gross bonus before the pension deduction (standard) or only on the cash portion (salary-sacrifice arrangement). The bonus calculatorlets you select your employer’s rules to see the exact impact.
Revenue sets the maximum pension contribution as a percentage of your “net relevant earnings” based on your age bracket:
| Age | Max contribution (% of earnings) |
|---|---|
| Under 30 | 15% |
| 30–39 | 20% |
| 40–49 | 25% |
| 50–54 | 30% |
| 55–59 | 35% |
| 60+ | 40% |
The earnings cap for pension relief is €115,000 for 2026. If your salary plus bonus exceeds this, relief is calculated on the capped amount only. For example, if you earn €120,000 salary plus €20,000 bonus, your total pension contribution attracts relief on €115,000 only.
The bonus calculator’s “Cash + Pension (balanced)” scenario finds a middle ground: enough sacrifice to reduce your effective tax rate meaningfully, while still keeping some cash in hand. The optimal split depends on:
The calculator’s AVC slider lets you dial in any percentage from 0% to 100% and see the net cash, tax paid, and pension contribution update in real time.
Not all employers handle bonus pension contributions the same way. The most common variations are:
If you are unsure which applies, check your employer’s pension scheme booklet or ask payroll. The bonus calculatorincludes an employer rules selector so you can model your specific situation.
Yes. The total pension contribution from your salary plus any bonus sacrifice counts toward the same age-related percentage limit and the €115,000 earnings cap.
Usually no. The sacrifice election must be made beforepayroll processes the bonus payment. Once the cash is paid, you can still make a personal AVC, but it won’t benefit from the PAYE/USC/PRSI exemption that a payroll sacrifice provides.
Some employers do not support this arrangement. In that case, you can still make a separate AVC into your pension after the bonus is paid and claim tax relief at your marginal rate via your annual tax return or Revenue’s myAccount service.