Pension tax relief rises to cover pots of up to €2.8m by 2029 under Cabinet plans

Retirees will be able to get tax relief on up to €2.8 million in a pension pot under plans being considered by cabinet on Wednesday morning.
The government is considering a proposal from Minister for Finance Jack Chambers to gradually increase the figure – which currently is limited to €2 million – by €200,000 a year until 2029, starting in 2026 and culminating in 2029.
The limit had been pointed to as a barrier to the filling of senior positions within the Garda, as well as a potential stumbling block for other high earning public servants.
Once a pension pot exceeds €2 million under current rules it is subject to additional taxation.
A review of the standard fund threshold, as it is known, was announced last December by then Minister for Finance Michael McGrath. The value of the pensions of several hundred senior civil service personnel at principal officer or above is now at or above €2 million each, according to submissions to the review group.
Last year it emerged that concern over tax implications on retirement was dissuading gardaí from seeking promotion to higher-grade positions.
Public service pension schemes, particularly those in place before 2013, generally provide for 50 per cent of salary and a lump sum of 1.5 times salary based on full service. Groups such as doctors argue that current salary levels could see them hit the SFT limit years before normal retirement age – which could encourage some to depart ahead of schedule.
Submissions to the review maintain that funds above the threshold level are subject to a chargeable excess tax of 40 per cent effective rate.
The employers’ group Ibec said if USC and PRSI was included, this resulted in an effective rate on income above the SFT of up to 72 per cent.