The Standard Fund Threshold (SFT) represents the maximum pension fund an individual can accumulate tax-free over their lifetime. Prior to any benefit drawdown, the full SFT is available for use. Benefits drawdown for payment is known as a Benefit Crystallisation Events (BCE) e.g. date of claiming a pension plan or date of HSE and/or GMS retirement. For each BCE, the capitalised value of the benefits drawdown is offset against the SFT reducing the amount available for future use.

 

The SFT applies to the total value of all pension benefits an individual holds not to each pension individually. These include:

• Occupational pension schemes (both defined benefits such as the HSE pension, defined contributions as well as the GMS SuperAnnuation)
• Personal Retirement Savings Accounts (PRSA)
• Retirement Annuity Contracts/Personal Pension Plans (RAC)
• Additional Voluntary Contributions (AVC)

 

The SFT does not apply to State pensions and foreign pension are included under certain circumstances.

 

The current SFT ceiling is €2 million.

 

However, the SFT will increase from its current level of €2 million to €2.8 million. This increase will occur incrementally from 2026 to 2029, rising by €200,000 annually.

2026: €2,200,000

2027: €2,400,000

2028: €2,600,000

2029: €2,800,000

 

After 2029, further adjustments to the SFT will be linked to wage growth. This is intended to ensure that the threshold continues to reflect economic conditions, preventing pension savings from being eroded by inflation and wage increases.

 

Exceeding the threshold results in a Chargeable Excess Tax (CET) of 40% on the surplus amount.

 

The phased increase of the SFT limit will undoubtedly introduce important new considerations for retirement planning, making it essential for members to seek professional financial advice. This is of particular importance to those that are nearing the SFT limit.

For further advice please contact IMO Financial Services on imofs@imo.ie