{"id":985170,"date":"2026-05-26T04:43:15","date_gmt":"2026-05-26T04:43:15","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/985170\/"},"modified":"2026-05-26T04:43:15","modified_gmt":"2026-05-26T04:43:15","slug":"pension-millionaires-to-benefit-from-higher-tax-relief-over-coming-years-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/985170\/","title":{"rendered":"Pension millionaires to benefit from higher tax relief over coming years \u2013 The Irish Times"},"content":{"rendered":"

The standard fund threshold (SFT) on Irish pensions<\/a> has been at the same level since 2014, but in January much-called-for changes finally came into effect.<\/p>\n

The threshold represents the maximum pension fund that can be accumulated under attractive tax<\/a> relief.<\/p>\n

The changes mean that pension savers can now put aside more for their retirement<\/a> without onerous tax rates kicking in, as the threshold has increased by \u20ac200,000 to \u20ac2.2 million. Not only that, but the threshold will continue to rise each year until 2029 and beyond.<\/p>\n

\u201cIt\u2019s good news,\u201d Munro O\u2019Dwyer, a partner at PwC<\/a>, says. \u201cIt gives much greater capacity for someone to fund their pension benefits.\u201d<\/p>\n

But, from a pension tax planning perspective, how should retirement savers change their approaches? Is there anything in these changes for the non-millionaire pension savers?<\/p>\n

The threshold<\/p>\n

Until 2005, there was no limit on how much people could accumulate tax efficiently in a pension fund while still being subject to the normal rates of taxation on this income in retirement.<\/p>\n

However, that year the government introduced a cap on tax-relieved pension fund investment \u2013 the SFT \u2013 for the first time at a level of \u20ac5 million. <\/p>\n

Once a pension fund went over this threshold, anything above the threshold became subject to something called chargeable excess taxation. Levied at a rate of 40 per cent, this excess tax is charged on top of other taxes once the fund is crystallised, giving rise to a potential combined tax rate of 71 per cent on any funds over the threshold as the excess income is drawn. <\/p>\n

Back in those early days, the threshold increased each year on the back of indexation, touching \u20ac5.4 million, before it was slashed back to \u20ac2.3 million in December 2010. From the start of 2014, it was cut even further, back down to \u20ac2 million where it has stayed until now.<\/p>\n

Typically, people who might have been approaching the \u20ac2 million limit would look to withdraw their pension benefits earlier than they might otherwise have planned. This is because once the amount saved is under the standard fund threshold at the point of retirement, those retirement funds can continue to grow in a structure such as an approved retirement fund, known as an ARF. Dialling down investment risk to lower returns and the risk of exceeding the threshold was another approach used.<\/p>\n

[\u00a0Will auto-enrolment obligations limit what I can invest in my private pension?<\/a>\u00a0]<\/p>\n

However, amid growing concern at the difficulty in filling top jobs<\/a> in the public sector due to this penal chargeable excess tax on pensions, it was announced in 2024 that the threshold would increase over a number of years. <\/p>\n

The SFT rose by \u20ac200,000 in January and it is to increase by the same amount over the next three years. That means it will stand at \u20ac2.8 million by 2029. Thereafter, the threshold will be indexed to wage growth, which means it will reach \u20ac3 million shortly thereafter. <\/p>\n

\u201cIt\u2019s a significant amount of money,\u201d O\u2019Dwyer says. \u201cThe much bigger positive here is the fact that people who are in their 50s, and would be impacted by the \u20ac2 million, can now plan differently.\u201d<\/p>\nStandard Fund Threshold: What Ceiling Applies<\/tr>\n\nYear<\/b><\/td>\n\u20ac<\/b><\/td>\n<\/tr>\n\n2025<\/td>\n2,000,000<\/td>\n<\/tr>\n\n2026<\/td>\n2,200,000<\/td>\n<\/tr>\n\n2027<\/td>\n2,400,000<\/td>\n<\/tr>\n\n2028<\/td>\n2,600,000<\/td>\n<\/tr>\n\n2029<\/td>\n2,800,000<\/td>\n<\/tr>\n\n2030<\/td>\n2,800,000+<\/td>\n<\/tr>\n\n\nSource: Revenue <\/td>\n<\/tr>\n

It certainly does take the pressure off those at the upper end of retirement savings. <\/p>\n

Laura Reidy, director of wealth management with Cantor, says she has been navigating the SFT path with a \u201cgood cohort\u201d of clients who would have been approaching the \u20ac2 million limit. She says the change will offer more flexibility when planning. <\/p>\n

Of course, a pension fund in excess of \u20ac2 million sounds far beyond the reach of most of us; the average amount saved in an Irish pension scheme is closer to \u20ac111,000 after all.<\/p>\n

A fund of close to the threshold does offer a handsome annual income. According to Irish Life<\/a>, if you were, for example, to buy an annuity with a \u20ac2 million lump-sum, you would be looking at an annual income of about \u20ac109,000, based on an annuity rate of 5.442 per cent.<\/p>\n

Increasing that sum to what will be the top rate of the SFT in 2029 \u2013 \u20ac2.8 million \u2013 gives an annual income of about \u20ac152,000 based on this annuity rate.<\/p>\n

Taxation<\/p>\n

So pension savers will now be able to put more away for their latter years without hitting that the threshold, but if they do go over the revised standard fund threshold, chargeable excess tax at a rate of 40 per cent will still apply \u2013 perhaps because it brings in significant tax. <\/p>\n

According to the Revenue Commissioners<\/a>, it collected \u20ac50.1 million under this tax heading in 2025, up slightly from \u20ac49.9 million in 2024. <\/p>\n

For now, the rate of chargeable excess tax will remain where it is despite criticisms that it is too high. <\/p>\n

In Donal de Buitl\u00e9ir\u2019s independent review of the issue for the Department of Finance<\/a> in 2024, he argued that the chargeable excess tax at 40 per cent was \u201cpenal\u201d and he recommended that a rate of 10 per cent would be a sufficient disincentive as it would mean that effective tax rate on the excess benefits over the threshold would still be more than the top marginal rate of tax. <\/p>\n

The best the Government is offering is a commitment to review the rate by 2030, so there is a chance it might change over the coming years. <\/p>\n

\u201cI can certainly see a clear logic from reducing this rate down from 40 per cent,\u201d O\u2019Dwyer says. Reidy agrees that a reduction \u201cstill might happen\u201d.<\/p>\n

Approaching the threshold<\/p>\n

For now, when it comes to pension planning, those with big pension funds still need to keep a close eye on how close to the threshold they might be to avoid this onerous tax.<\/p>\n

\u201cThere is clearly a step to be taken to consider deferring the point of accessing your pension benefits,\u201d O\u2019Dwyer says, as next year the threshold will have jumped by another \u20ac200,000.<\/p>\n

Another option that has been used until now, and one that will likely continue to be popular in terms of managing the retirement process, is structuring retirement savings in various personal retirement savings accounts (PRSAs). As Reidy notes, this allows a retirement saver to enter retirement on a phased basis, as they can access one PRSA, take out what they want to access and leave everything else in an accumulating PRSA.<\/p>\n

\u201cIt\u2019s very much a case of trying to optimise their expense and income in a tax-efficient manner,\u201d she says.<\/p>\n

Those who have turned off employer pension contributions in recent years to stay within the threshold face a stiffer challenge as O\u2019Dwyer notes it may not be \u201cthat straightforward to unwind\u201d.<\/p>\n

It will depend on your circumstances, but \u201cneeds a little bit of thought\u201d, he says. <\/p>\n

Normal pension savers<\/p>\n

The changes to the SFT are focused on a relatively small cohort of higher earners. But pension experts are hopeful for some changes going forward that could benefit a wider group of people.<\/p>\n

Reidy would like to see \u201cmore harmonisation\u201d across pensions and, in particular, PRSA funding, which she argues should be brought into line with occupational pension schemes, an \u201canomaly\u201d that exists as a result of the Finance Act 2024. As of now, when a company contribution is made to a PRSA that exceeds 100 per cent of an employee\u2019s salary, it is treated as benefit in kind. <\/p>\n

[\u00a0Changes to tax relief on employer contributions to PRSAs are unfair on business owners<\/a>\u00a0]<\/p>\n

On the \u20ac115,000 annual limit on earnings against which tax relief on contributions is assessed \u2013 a figure that has been unchanged for 15 years \u2013 Reidy would like to see this revised upwards. <\/p>\n

\u201cIt promotes healthier savings habits for long-term retirement planning,\u201d she says. She also would like to see pensions examined more through a gender lens, noting that a possible help here would be for couples to be able to share a cumulative pension limit between them. <\/p>\n

\u201cAnything that discourages pension saving should be looked at,\u201d Reidy says.<\/p>\n","protected":false},"excerpt":{"rendered":"The standard fund threshold (SFT) on Irish pensions has been at the same level since 2014, but in…\n","protected":false},"author":2,"featured_media":985171,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[3093],"tags":[51,38881,474,28728,150267,2074,2499,32130,2250,29031,1200,16,15],"class_list":["post-985170","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-department-of-finance","tag-finance","tag-for-you","tag-irish-life","tag-pension","tag-personal-finance","tag-pwc","tag-retirement","tag-revenue-commissioners","tag-tax","tag-uk","tag-united-kingdom"],"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/985170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=985170"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/985170\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/985171"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=985170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=985170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=985170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}