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Minister McGrath announces the commencement of the targeted examination of the Standard Fund Threshold regime
Minister McGrath announces the commencement of the targeted examination of the Standard Fund Threshold regime
The Minister for Finance, Michael McGrath, T.D., has today (14th December) announced the commencement of a targeted review of the Standard Fund Threshold (SFT) regime. The examination is being led by an independent expert, Dr. Donal de Buitléir, with support from the Department of Finance.
The first step in the examination is a public consultation which opens shortly and runs until [26 January 2024]. More details on how to participate in the consultation are available on the Department of Finance website Public Consultation on the Standard Fund Threshold .
Minister McGrath commented:
“I am pleased to announce the commencement of this examination of the Standard Fund Threshold regime and in particular the opening of the public consultation. The SFT has remained unchanged since 2014 and it is timely to undertake an examination of it taking account of the Commission on Taxation’s recommendation that it be set at “an appropriate and fair level of estimated retirement income.”
The review will consider the impact of any change to the SFT on the overall tax expenditure associated with pension provision and its associated distribution, and the need for equity in treatment across taxpayer groups and between public and private sector workers.
The public consultation will be an important opportunity for interested parties to express their views in relation to the operation of the SFT and put forward their proposals for any amendments. I encourage all stakeholders to participate in the public consultation process.
“I am delighted that Dr. Donal de Buitléir, with his relevant skills and expertise, has agreed to lead the examination. I look forward to receiving the results of the examination next summer.”
The Standard Fund Threshold (SFT) is the limit or ceiling on the total capital value of tax-relieved pension benefits that an individual can draw down in his or her lifetime from all of that individual’s pension arrangements. The SFT was introduced in December 2005 and is currently €2 million.
On each occasion that an individual becomes entitled to receive a benefit under a pension arrangement for the first time (called a “benefit crystallisation event” (BCE)), they use up part of their SFT. At each BCE, a capital value is attributed to the benefits that crystallise and the value is then tested against the SFT, by the pension scheme administrator. When the capital value of a BCE, either on its own or when aggregated with prior BCEs, exceeds an individual’s appropriate fund threshold, a “chargeable excess” arises and a tax charge at 40% is immediately applied on the amount of the excess. In addition, when the remainder of the excess is subsequently drawn down as a pension (or, for example, by way of a distribution from an ARF or vested PRSA), it is subject to tax at the individual’s marginal rate.
Bio of Dr Donal de Buitléir
Dr Donal de Buitléir is a current member of The Policing Authority (since March 2021). He was the Chairperson of the Independent Review Panel on Senior Public Service Recruitment and Pay Processes and former Chairperson of the Low Pay Commission (2015 to 2021). He is also a former Director of Publicpolicy.ie, former President of the Statistical and Social Inquiry Society of Ireland and a former Chair of the Foundation for Fiscal Studies. He was a Board Member of the Health Services Executive between 2005 and 2009. Previously he worked in AIB Group and in the Irish public service (Revenue Commissioners). He was Secretary to the Commission on Taxation 1980-85 and was a member of a number of Government reviews in the areas of local government reform, integration of tax and welfare, business regulation, health funding and higher education.