DO YOU NEED A PERSONAL FUND THRESHOLD CERTIFICATE?

The Government will set tax relief on pension contributions at 33% in a reversal of the previous administration’s decision to cut them progressively from 41% to 20%, The Sunday Times reports.

The previous finance minister Brian Lenihan had proposed slashing the rate of tax relief gradually until the end of 2014 as part of the so-called national recovery plan approved by the IMF and the EU. However, both coalition partners in the new Government opposed this in the run-up to the election.

The newspaper quoted a Government source who said the changes in relief were likely to be included “in the context of a budget”, but would not say if this would be in the December one.

Meanwhile, The Sunday Business Post reports on the thousands of high-earners who may be losing out because they have failed to take up exemption certificates from a recently lowered tax threshold on pensions.

“An estimated 6,000 people are affected by the recent changes in taxation on pensions, but Revenue has said that it has received only 244 applications for the exemption certificates to date. The deadline for applications falls on June 7,” the newspaper says.

The Finance Act reduced the maximum allowable tax-incentivised pension on retirement from €5.4m to €2.3m. However, individuals with ‘uncrystallised’ pension rights after December 7, 2010, can apply for a Personal Fund Threshold (PFT) certificate and have that income assessed under the previous threshold.

Anyone who retires after June 7, with a pension worth more than €2.3m and who doesn’t have the certificate will be taxed at 41% on the value of assets above that €2.3m figure. This will be in addition to any other taxes applicable to the drawdown of a pension. For example, a person who retires with a pension pot of €3m and no PFT would have to pay €287,000.