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Funding a pension plan and deducting the contributions
The module’s worked examples, then cases to attempt before revealing their solution · 5 sections · 427 words · 5 min
Worked example
Three sources, one deductible total
Chiara pays €1,200 herself, her employer pays €900 and the severance pay transferred is €2,100. Only €1,200 + €900 = €2,100 counts towards the cap, well under €5,300. Severance pay stays out of the sum. Chiara still has €5,300 − €2,100 = €3,200 of headroom: a voluntary payment up to that amount would be fully deductible.
Worked example
A professional above the cap
An architect taxed under the ordinary regime pays €7,000 into her individual plan in 2026. She deducts €5,300 in her Redditi return. The other €1,700 saves nothing now, but it must not be taxed a second time later: she reports it to the plan by 31 December 2027.
Worked example
One parent, two positions, one cap
A mother pays €4,000 into her own fund and €2,000 into the fund of her student son, who is her dependant and has no income. The €6,000 total exceeds the cap: she deducts €5,300 and reports the remaining €700 to the funds, stating which position it relates to.
Worked example
Someone hired in September
A café hires a young woman in her first job on 1 September 2026 and hands her the briefing on the sector fund on day one. She signs no opt-out, so the sixty days run out at the end of October. The café notifies the fund and, from November, starts paying in, including the severance pay and contributions owed since 1 September.
Practical case
Making up for the years of small payments
Luca found his first job in 2020 and joined a pension fund straight away. From 2020 to 2024 the annual cap was €5,164.57 and he paid €1,000 a year, always deducted. In 2025 he used no catch-up. In 2026 he pays €8,000 in total. How much can he deduct for 2026, what must he report to the fund, and how much catch-up room does he have left for later years?
Hint: First work out the unused room in the first five years, then apply the yearly limit on the catch-up.
Show the solution
In his first five years Luca could have deducted 5 × €5,164.57 = €25,822.85; he paid 5 × €1,000 = €5,000. The room to recover is €25,822.85 − €5,000 = €20,822.85. 2026 falls within the twenty years after the fifth, so at most half the cap, €2,650, is added to the €5,300: the year's limit is €7,950. Luca deducts €7,950 and reports the €50 not deducted to the fund by 31 December 2027. His remaining room falls to €20,822.85 − €2,650 = €18,172.85.
Answer: He deducts €7,950, reports €50 not deducted, and has €18,172.85 left to recover
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