The Standard Fund Threshold (“SFT”) (ie the maximum allowable pension fund at retirement for tax purposes) has been reduced again, this time from €2.3m to €2m, with effect from 1 January 2014.

Where an individual’s pension rights exceed the new lower SFT on 1 January 2014, such individual can protect those rights by formally applying to the Revenue Commissioners for a Personal Fund Threshold (PFT) of up to €2.3m.

For members of DB schemes, new valuation factors have been introduced to establish the capital value of the member’s pension entitlements for SFT purposes.  The “old” valuation factor of 20 will continue to apply in respect of benefits accrued up to 1 January 2014.  However, any pension benefit accrued after this date will be valued using a higher age related factor.  The new valuation factors vary from 37 for individuals who draw down their pension at age 50 or below to 22 for individuals who draw down at age 70 or over.

Comment

Employers should ascertain if any of their employees are likely to reach this reduced SFT and to put in place appropriate arrangements, if necessary, to take account of any such scenario.