Apart from contributing to curbing the overall tax expenditure, these changes will bring further equity to the system by impacting, for the most part, on higher earners. Deputies will recall that the Commission on Taxation recommended that a pension lump sum taken on retirement should be tax free up to €200,000 and taxed at the standard rate of income tax on any balance above that amount. The commission also recommended that the correlation between the maximum tax relieved pension fund that can be built up by an individual, known as the standard fund threshold, and the annual earnings limit for pension contribution purposes should be maintained. This correlation has been broken in recent years as the earning limits fell from €275,000 in 2008 to €150,000 in 2009, with no corresponding contraction in the standard fund threshold. The commission recommended that ex gratia termination lump sums should also be tax free up to €200,000 and that any amount in excess of this should be taxed.

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