Self-employment can be a challenge. Being your own boss is great in a lot of ways, but being your own HR department? Your own tax accountant? Your own company benefits team? Not so much! One big challenge for a lot of self-employed workers in Ireland is how to navigate and set up a self-employed pension. 

When you’re a PAYE employee and part of a company pension scheme, a lot of the hard work gets done for you. When you’re self-employed, no such luck. Even if you have hired an accountant, it is still your responsibility to keep the money you owe for income tax, USC, and PRSI aside until it is time to pay. Not to mention that you may not have a fixed income each month to make regular contributions.  

Understanding self-employed pensions in Ireland 

When not part of an employee pension scheme, you have historically had three choices for your personal pension in Ireland: PRSA, SAP, or Company Pension. Let’s explore these in more detail.  

Personal Retirement Savings Accounts (PRSAs) 

A PRSA is a common personal pension option both for self-employed workers and for those not part of an existing company pension scheme. It is a type of personal pension that was introduced to Ireland in 2002 as a simple, flexible pension for everyone no matter their employment status.  

When setting up a PRSA, you will typically speak to a financial advisor or use an automated questionnaire to assess your risk tolerance and set out your financial aims. Based on this, the PRSA will be invested in one of several portfolios that makes the most sense for you.  

PRSA details 

• Government regulation: PRSA products in Ireland are approved by Revenue and the Pensions Authority. The Pensions Authority also supervises PRSA providers and makes sure that they are compliant. Most people will take out a standard PRSA, which is regulated to have a maximum 5% charge on each contribution and 1% per year fund management charge.  
• Flexibility: PRSAs can be carried across to different providers and adapt easily to changing work circumstances. They can also be paused and restarted at any time and require a low minimum investment of €300 per year. 
• Limited control: while you can, in a general sense, choose the way in which your money is invested (according to your risk tolerance and preferences) you have little control over the specific investments made. In general, your money will be invested in pre-set portfolios and you will not be able to pick and choose the specific investments within these.

Self-Administered Pensions (SAPs) 

As of 2024, new Self-Administered Pension (also known as a Small Self-Administered Scheme or SSAS) schemes cannot be issued. However, this kind of pension was often best for business owners or company directors. Whereas with a PRSA you effectively make your contributions and then sit back while an investment manager or company takes care of the rest, you are much more involved with this kind of pension.  

SAP details

• Direct control: as the name suggests, Self-Administered Pensions gave you much more control over your investments, rather than picking an investment template as you would in a PRSA. This would only have been recommended for people very comfortable with investing and finances. 
• Active involvement: with a PRSA, you simply have to decide your investment strategy based on your risk tolerance and financial goals, make your contributions, and then simply sit back and monitor the investments. With a Self-Administered Pension you had to be much more involved on a more regular basis – in other words, this pension was more work! 
• Tailored investments: the setup of SAPs allowed for an investment strategy tailored to your specific needs in a much more bespoke way than a PRSA. Whether or not you considered this an advantage over a PRSA depended upon your confidence and experience with investments. 

Company Pensions  

If you are self-employed as a sole trader, it may make sense to set up a single-person limited company instead. This can have significant tax benefits, especially when it comes to pensions.  

As a sole trader, you are subject to effectively the same income tax relief as a PAYE employee: a percentage of your income depending on your age, capped at a salary of €115,000.  

However, when you set up with a limited company structure, your company can pay into a company pension (or PRSA) which allows you to avail of corporation tax relief in addition to the pension contribution income tax relief that you receive as an employee. The result is further overall tax savings. 

Income tax relief on pension contributions 

The most generous tax relief available to Irish workers (whether self-employed or PAYE) comes in the form of income tax relief on pension contributions.  

Those workers eligible for income tax relief can make significant tax savings by contributing to a personal pension. Most Irish workers can contribute between 15% and 40% of their income to a pension, and that income will not be subject to income tax. 

Your age	Income tax-free pension contribution
29 or younger	15%
30-39	20%
40-49	25%
50-54	30%
55-59	35%
60 or older	40%

For example, someone in their early 30s who earns €50,000 per year could save up to €4,000 in income tax by making the most of their pension allowance and contributing €10,000 (20%) to a pension. Effectively, they would be paying income tax on a salary of €40,000 rather than €50,000 and be able to claim further income tax relief from Revenue. 

Note that this income tax relief applies only to the first €115,000 of your income (at any age). 

Do self-employed workers get the state pension? 

Yes, self-employed workers with enough PRSI contributions are entitled to the state pension, just like PAYE employees.  

It’s important to know whether you qualify for the state pension, because it could have a significant impact on your total retirement income. Just take a look at our pension calculator to see what happens to your projected retirement income when you toggle the state pension on or off!  

About Class S contributions for self-employed workers 

When you are self-employed, you pay Class S PRSI contributions as part of your tax returns for each year. Class S PRSI contributions were introduced in April 1988 for self-employed workers.  

Self-employed qualification for the state pension  

To qualify for the state pension at 66, you have to have hit a few requirements. These include the number of PRSI contributions made and the time period in which you made them. Your age may also affect the requirements, because there have been changes to the state pension over time and some or all of your contributions may have been made under different rules.  

You can read more about qualifying state pension contributions at Citizens’ Information. 

Next steps: how much do you need to save?

With the state pension providing less than €12,500 of income per year, it’s a great idea to supplement this with a private pension. But how much do you need to save now in order to enjoy your retirement in what seems like a far-flung and distant future to most of us?

Fortunately, we’ve got your back. The Irish Life pension calculator is a great tool to see how much you can expect to have in retirement based on your earnings and savings now – and to see how much you should be saving to reach your retirement goals.

Calculate your pension