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 is currently €2 million and anything over this amount will be liable to chargeable excess tax at 40%.
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: