Pearse Doherty (Donegal, Sinn Fein)
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88. To ask the Minister for Finance the estimated cost of increasing the standard fund threshold to €2.2 million from its current level of €2 million; and if he will make a statement on the matter. [41985/24]

Pearse Doherty (Donegal, Sinn Fein)
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89. To ask the Minister for Finance the estimated number of people that will benefit from his plan to increase the standard fund threshold from €2 million to €2.2 million; and if he will make a statement on the matter. [41986/24]

Jack Chambers (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 88 and 89 together.

The Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement for tax purposes which was introduced in Budget and Finance Act 2006 to prevent over-funding of pensions through tax-relieved arrangements.

I am informed by Revenue that they are unable provide a costing for changes to the SFT. Information on the numbers and values of individual pension funds or on individual accrued benefits in pension schemes are not generally required to be supplied to Revenue. Therefore, currently there is no readily available underlying data or methodology on which to base reliable estimates of any possible yields that might be realised arising from reductions to the SFT as outlined by the Deputy.

As the Deputy will be aware, the examination of the Standard Fund Threshold has recently concluded and in the context of this examination my officials examined the issue of estimating the impact of changes to the SFT using only the available information about previous payments of Chargeable Excess Tax (CET). Following this examination, the Department prepared some indicative estimated costs, based on the information available. I would note that these estimated costs do not take account of behavioural changes and are based on a reduction of the current CET yield. Using this model, the indicative costing of increasing the standard fund threshold €2.2million would be approximately €10.5million.

It is important to note that the indicative costs above relate only to CET. All pensions are subject to tax on drawdown (with the exemption of a tax free lump sum). The examination of the SFT noted that this tax paid on drawdown should be included in any overall consideration of the cost of pensions tax relief, which could be better characterised as tax deferred. The issue of calculating the cost of pension tax expenditure will be considered by the implementation group to be established to consider further a number of the recommendations in the report.

In regards to the number people of people that will benefit from these increases, it is not possible to provide an estimate of this. The nature of the SFT means that there are many variables that affect the value of retirement benefits when it is being compared to the SFT, and the valuation will depend on the individual’s circumstances. In addition, individuals can choose to retire at a range of ages, and for a variety of reasons. Therefore, it is not possible to forecast how many how many taxpayers are going to retire in 2026 with an SFT between €2 million and €2.2 million, and not possible to provide a figure on the number of taxpayers who might benefit from the change. I would note that the information that is available indicates that there were 224 payments of CET to Revenue through RevPay in 2023. However, this does not include taxpayers whose CET liability was covered by offsets of lump sum taxation.