Does pension reduce USC in Ireland?
In many common setups, USC is calculated on gross income and is not reduced by pension contributions, even when PAYE is reduced. The exact treatment can depend on the pension type and payroll setup.
Why does pension reduce PAYE but not USC?
PAYE is based on taxable income after certain deductions, while USC often uses a gross income base. This difference is why a pension increase may reduce PAYE more than USC.
How should I model pension scenarios?
Run the same salary with different pension contribution rates and compare net pay and the PAYE line item. Expect USC and PRSI to move differently from PAYE depending on your scenario.