On 18 September 2024, the Minister of Finance outlined some key decisions taken by the Government in respect of the SFT, which are likely to affect changes to the Finance Act soon.

The SFT is a limit on the value of benefits which an individual can build up in their lifetime from Irish pension arrangements. Any excess value of benefits above the SFT is liable to a chargeable excess tax (“CET”), levied at 40%. The current €2 million limit has remained unchanged since 2014.

The key decisions taken by the Minister of Finance include:

• The SFT will increase in four annual phases of €200,000, between Jan 2026 and Jan 2029, ultimately reaching €2.8 million.
• From 2030, the limit will be increased by a growth rate based on CSO earnings data.
• The threshold for the higher rate of tax to apply to a retirement lump sum will be fixed at €500,000 in Budget 2025. The existing threshold is expressed as a proportion of the SFT, currently 25%.
• For Defined Benefit pension schemes, an independent actuarial evaluation of the age-related factors will be carried out. The independent review recommends:
  • Streamlining the factors into 5-year age bands.
  • Using different factors depending on indexation and spouses/dependents pension elements.

To find out more, our SFT Update Summary outlines the key decisions, examines some practical sample scenarios to show how impacted members might best navigate these changes and covers the other key takeaways from the independent review, which are to be considered by the government working group.