Taxation of pensions
Chargeable excess tax
If your pension fund at retirement exceeds the Standard Fund Threshold (SFT), it will be liable to a chargeable excess tax. The SFT between 2014 and 2025 was €2 million. Finance Act 2024 made changes to the SFT, which are being phased in from 2025. The value of the SFT in each of the relevant years of assessment is as follows:
- For 2026, €2.2 million
- For 2027, €2.4 million
- For 2028, €2.6 million
- For 2029, €2.8 million.
For 2030, the SFT will be an adjusted amount to account for the growth in average weekly earnings between 2025 and 2029. For 2031 and all future years, the SFT will be the higher of these two figures:
- The previous year's SFT
- or
- An adjusted amount taking account of the growth in average weekly earnings between previous year and the year before the previous year.
For further information, please see Pension Manual Chapter 25.
Chargeable excess tax is ringfenced, meaning no reliefs, allowances or deductions can be made against it. However, where an individual has tax deducted from their retirement lump sum, the chargeable excess tax may be reduced. The amount of tax paid at the standard rate for the retirement lump sum may be offset against the chargeable excess tax liability. For further information, please see 'Taxation of retirement lump-sums' and Pension Manual Chapter 27.
When chargeable excess tax arises, Form 787S should be completed by the pension administrator and submitted to Revenue. The excess should be paid within three months of the end of the month in which the lump sum occurred.
Pension scheme providers and, where applicable, administrators, should deduct the chargeable excess tax and pay it to Revenue. All queries in respect of the excess lump sum and chargeable excess tax should be directed to the: