The Real Standard Fund Threshold

The current Standard Fund Threshold in Ireland is €2,000,000 and many see this as the maximum possible fund that can be built up without being hit with Revenue’s chargeable excess tax of 40%. However many Defined Contribution (DC) savers can fund for a higher amount without incurring the chargeable excess tax.

The rationale is that you can fund to €2,150,000 and avoid chargeable excess tax by using the tax paid on pension lump sum as a credit to offset this chargeable excess tax. This assumes the client takes €500,000 of the fund as a lump sum (allowable under the 25% route for a DC Fund of €2,000,000 or higher). The first €200,000 is tax free and the remaining €300,000 is taxed at 20% or €60,000. This tax paid on the lump sum can be offset against the chargeable excess tax bill reducing it to nil effectively allowing the client to fund to €2,150,000 without paying any chargeable excess.

In this weeks TechTalk we review the Standard Fund Threshold and look at the various options available to clients with a fund in excess of €2 million.

Find out more here.