Under the new approach the maximum lifetime pension tax free sum will be €200,000 as from 1 January 2011. Amounts in excess of this tax free limit will be subject to tax in two stages. The portion between €200,000 and €575,000 will be taxed at the standard rate of 20% while any portion above that will be taxed at the individual's marginal rate of tax. The figure of €575,000 represents 25% of the new lower standard fund threshold of €2.3 million mentioned earlier and retains the link to the old approach. The standard rate charges effectively ring-fence to ensure that no reliefs, allowances or deductions may be set or made against that portion of a lump sum subject to that charge.

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