Relief for Chargeable Excess

Where the value of an individual's pension benefits at retirement exceed the reduced Standard Fund Threshold (SFT) of €2.3 million (or a higher Personal Fund Threshold – PFT), a chargeable excess subject to penal taxation arises.

Measures have been introduced in the Bill to reduce the immediate tax burden where a chargeable excess arises by providing that:

• No more than 50% of a retirement lump sum can be appropriated to pay the tax liability
• The remaining tax liability, if any, can be covered by either a distribution from an ARF and/or by way of a reduction in the gross annual pension payable under the scheme over a max period of 10 years
• A credit will be allowed for tax paid on excess retirement lump sums over €200,000

Public and Private Sector Pensions

Provision has been introduced to allow individuals a one-off opportunity to cash in their private pension savings, in whole or in part, with a view to avoiding a chargeable excess arising when the public service pension crystallises. Tax at the marginal rate will apply to the encashment.