There were some welcome changes to the maximum pension amount a person can contribute to a pension.  Up to now, the maximum pension limit, known as the Standard Fund Threshold (SFT) was €2m. This upper threshold was usually reached via a combination of company and personal contributions, and investment growth. The new changes are: 

Phased SFT Increase
The SFT, currently at €2,000,000, will see incremental increases, until it reaches €2,800,000. So, in 2026, the SFT will increase by €200k to €2.2m. It will increase by the €200k each year until the new upper limit of €2,800,000 is reached by 2029. From 2030 onwards, it will be adjusted annually based on average weekly industrial earnings. 

Lifetime Lump Sum Threshold Fixed
The lifetime threshold for the 20% tax rate on retirement lump sums will be fixed at €500,000, decoupling it from the SFT. It will no longer be set as 25% of the SFT as has been the case up to now.

Chargeable Excess Tax (CET)
While the CET rate of 40% on pension funds exceeding €2 million remains unchanged for now, a review is scheduled by 2030 with recommendations to potentially lower it to 10%. Currently pension funds valued at over €2m on drawdown are subject to a Chargeable Excess Tax (CET) at 40%. The Government has said this will remain unchanged for now but that a review is to take place by 2030.

DB Scheme Valuation Review
An independent evaluation of Defined Benefit (DB) scheme benefit valuation/capitalisation factors will be conducted, potentially streamlining them into 5-year age bands and differentiating factors based on indexation and spousal/dependent benefits. 

Other Recommendations
The report puts forward various other recommendations requiring further consideration by an inter-agency group, including:

• Removing the €115,000 earnings limit and age-related limits for pension contributions.

It is recommended that the €115,000 relevant earnings limit for pension contributions is removed and that the age related limits (15% to 40% of earnings) are also removed. The report said that this would simplify the rules applying to tax relief for pension contributions and would be of particular benefit to individuals whose income is not spread evenly over their lifetime, e.g. the self-employed. The report said that it was difficult to see the need for annual limits on pension contributions where an overall SFT limit is in place, but noted that changes may need to be done on a phased basis.

• Adjusting rules regarding CET liability sharing in Pension Adjustment Orders (PAOs).

A PAO is an order made by the courts, in the case of relationship breakdown, designating part of an individual's pension plan benefits to the individual's former spouse. Currently, when a pension adjustment order (PAO) is granted and a pension is retired, the CET liability is shared between former partners. As this CET tax must be settled immediately, this can cause friction and in some cases financial issues. It has been proposed that changes are made, however, legal advice from the Office of the Attorney General is likely to be required in order to develop specific proposals.

• Offering taxpayers a 20-year spread option for settling CET directly with Revenue.

At the moment, if you retire your pension and it exceeds the SFT, you are forced to settle your chargeable excess tax (CET) tax liability immediately. The report proposes that taxpayers could be given the option to settle CET tax directly with Revenue spread over twenty years. This would be instead of the pension scheme administrator remitting the tax to Revenue.