Pearse Doherty
Question:65. Deputy Pearse Doherty asked the Minister for Finance the estimated revenue in 2025 from reducing the standard rate threshold to €1.5 million; and if he will make a statement on the matter. [40542/24]
View answerWednesday, 9 October 2024
Questions (65)
Written answers
The Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement for tax purposes which was introduced in Budget and Finance Act 2006 to prevent over-funding of pensions through tax-relieved arrangements.
I am informed by Revenue that they are unable provide a costing for changes to the SFT. Information on the numbers and values of individual pension funds or on individual accrued benefits in pension schemes are not generally required to be supplied to Revenue. Therefore, currently there is no readily available underlying data or methodology on which to base reliable estimates of any possible yields that might be realised arising from reductions to the SFT as outlined by the Deputy.
As the Deputy will be aware, the examination of the Standard Fund Threshold has recently concluded and in the context of this examination my officials examined the issue of estimating the impact of changes to the SFT using only the available information about previous payments of Chargeable Excess Tax (CET). Following this examination, the Department prepared some indicative estimated costs, based on the information available. I would note that these estimated costs do not take account of behavioural changes and are based on a reduction of the current CET yield. Using this model, the indicative estimated revenue in 2025 from reducing the standard fund threshold to €1.5 million would be approximately €50 million. However, I would emphasise again that this indicative estimate does not allow for any behavioural changes.
It is important to note that the indicative costs above relate only to CET. All pensions are subject to tax on drawdown (with the exemption of a tax free lump sum). The examination of the SFT noted that this tax paid on drawdown should be included in any overall consideration of the cost of pensions tax relief, which could be better characterised as tax deferred. The issue of calculating the cost of pension tax expenditure will be considered by the implementation group to be established to consider further a number of the recommendations in the report.