In addition to the recent imposition of the Pension Levy, the Finance Bill 2011 reduced the maximum pension fund size. The maximum allowable pension fund on retirement for tax purposes (known as the Standard Fund Threshold (SFT)), has been reduced from €5.4 million to €2.3 million.
A higher personal fund threshold (PFT) may apply if, on 7th December 2010, the value of your pension assets was greater than €2.3 million. The value of any pension benefits already taken, (since 7 December 2005) will also be included.
Pension assets accrued above this threshold are now subject to 41% tax clawback on exit. As subsequent drawdown of funds will again be liable to income tax, USC and PRSI (where applicable) excess assets may be subject to effective double taxation up to 73%.
If the total of your pension assets was greater than €2.3million on the 7th December 2010 you have until the 7th June 2011 to send details of your assets to the Revenue Commissioners in order for the PFT to be certified. The maximum PFT that will be certified by Revenue is the previous SFT of €5.4 million.
If you have Defined Benefit pension rights in an existing or previous scheme the capitalisation factor for use in determining the value of this benefit for the purposes of an individual’s SFT is 20 times the pension payable.
If you already have a PFT under the existing arrangements you will retain that PFT.
If you think you need to apply for a personal Fund Threshold contact Anthony Casey for further information.