• Taxation of pension contributions – the earnings cap for individual pension contributions is reduced from €150,000 to €115,000 for 2011.  This cap, in conjunction with age related percentage limits, governs the maximum amount of tax relievable pension contributions that an individual can make.  Where a payment is made in 2011 in respect of the 2010 tax year, the lower limit will also apply.  Private pension contributions will not be deductible for the purposes of the Universal Social Charge (the PRSI changes which were announced in the 2011 Budget are reflected in Social Welfare legislation).
• Maximum allowable pension fund – the maximum allowable pension fund on retirement for tax purposes, known as the Standard Fund Threshold (SFT), is reduced from €5.4m to €2.3m with effect from Budget Day (7 December 2010).  Individuals whose pension rights exceeded the new SFT on Budget Day can protect this higher amount by providing details to Revenue within 6 months of Budget Day and Revenue may then certify a higher Personal Fund Threshold (PFT) for that individual.  When the capital value of the benefits drawn down by an individual exceed the SFT (or the individual’s PFT if applicable), a tax charge of 41% applies to the excess and is payable to the Revenue by the pension scheme administrator.  This charge is in addition to any tax charge that may apply on the payment of the pension to the individual.
• Retirement lump sums – retirement lump sums above €200,000 are taxable with effect from 1 January 2011.  The excess above €200,000 will be taxed at the standard income tax rate up to €575,000 and at the tax payer’s marginal rate thereafter.  Any tax free retirement lump sums taken on or after 7 December 2005 will be taken into account in calculating this cap. 
• Extension of access to Approved Retirement Fund – all defined contribution (DC) scheme members may now access an Approved Retirement Fund (ARF), subject to revised requirements regarding a guaranteed income.  Previously, individuals were required to have a guaranteed annual income of €12,700 (or approximately €63,500 in an Approved Minimum Retirement Fund) in order to avail of an ARF.  These financial requirements are increased to approximately €18,000 (or approximately €120,000) respectively before an individual can avail of the ARF option.  Certain transitional measures apply for those who retired before the passing of the Finance Act.
• Taxation of funds within an ARF – the deemed annual distribution which applies to the value of assets in an ARF at 31 December is increased from 3% to 5% in respect of ARF asset values at 31 December 2010 and future years.

Contributed by Michael Wolfe.