Earnings Adjustment Factor for the Year of Assessment 2008

Chapter 2C of Part 30 of the Taxes Consolidation Act 1997 (TCA1997), placed a limit on the total capital value of pension benefits that an individual can draw down in their life-time from tax-relieved pension products, where those benefits come into payment for the first time on or after 7 December 2005. The limit is €5,000,000 and is referred to in the legislation as the Standard Fund Threshold. A higher limit, known as the Personal Fund Threshold, can apply where an individual’s pension fund exceeded a value of €5,000,000 on 7 December 2005 and certain reporting requirements have been met.

Chapter 2C contains provisions for the indexation from 2007 of both the Standard Fund Threshold and the Personal Fund Threshold in line with an earnings adjustment factor to be designated in writing by the Minister for Finance in December each year and published in Iris Oifigiúil. In addition, section 790A of the TCA 1997 provides that the earnings limit which applies for the purpose of tax relief on contributions to pension products is also to be increased in line with the earnings adjustment factor, with effect from 2007.

On this basis, for the year of assessment 2007

• the Standard Fund Threshold was increased to €5,165,000, and
• the Earnings Limit in respect of tax relieved contributions was set at €262,382

The Minister for Finance has recently designated the average change in the average weekly earnings of industrial workers in all industries in the first half of 2007 as compared to the same period in 2006 (based on the latest available data published by the Central Statistics Office) as the earnings adjustment factor to be used for the year of assessment 2008. The factor published in Iris Oifigiúil for the year of assessment 2008 is 1.049.

Accordingly, for the year of assessment 2008

• the Standard Fund Threshold will be increased to €5,418,085, and
• the Earnings Limit in respect of tax relieved contributions will be increased to €275,239.

Where Revenue issues a certificate to an individual stating the amount of his/her Personal Fund Threshold, that amount may also be increased in line with the published factors for the years of assessment 2007 and 2008.

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