Wednesday, 15 October 2008
Department of Finance
Budget and Finance Act 2006 introduced a maximum allowable pension fund on retirement for tax purposes. A limit of â¬5 million was placed on the total capital value of pension benefits that an individual can draw upon in their lifetime from tax-relieved pension arrangements. This is known as the Standard Fund Threshold (SFT).
A higher limit (the Personal Fund Threshold â PFT) was also introduced at that time for individuals whose pension fund values exceeded â¬5 million on the date the SFT was introduced, 7 December 2005. The PFT was deemed necessary on the grounds that those individuals with pension funds in excess of â¬5 million had built up those funds in good faith over the years while availing of tax reliefs available by reference to the law as it stood prior to the change and it would not have been possible to retrospectively deny them those reliefs.
Finance Act 2006 also introduced indexation for both the SFT and PFT from 2007 onwards in line with an earnings factor. As a result, for example, the value of the SFT for 2008 has increased to over â¬5.4 million. Indexation will not occur in 2009 however.
As with the Budget 2006 change, therefore, any reduced SFT limit, as proposed by the Deputy would have to take account of the pension funds of individuals that had been built up legitimately above any new limit. Consequently, any reduction in the SFT would be unlikely to have immediate effects in terms of Exchequer savings.
I am also informed by the Revenue Commissioners that the relevant data is not captured in such a way as to provide a dedicated basis for compiling the estimates requested by the Deputy.