Standard Fund Threshold increase- Have to retire August 2026

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10amwalker

Registered User
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My husband reached the standard fund threshold some years back and stopped paying into his pension.
He has a defined benefit contribution pension.
His retirement is mandatory on reaching his 65th Birthday which is in August next year.
His salary is approximately €200,000 per annum.

With the SFT increased for 2025/6 to €2.2 million what action would you suggest he takes in relation to his pension ?
 
Depends on his current pension pot balance. The current SFT is in effect €2.15M due to the allowance he can get for 20% tax paid on Lump sump draw down from €200K-500K. In 2026 this will be €2.35M. Hopefully others can confirm these figures.

He may have scope to make AVCs for 2024, 2025 and 2026 of €46K per year (40% of max salary of €115K) so could potentially boost his pot by €138K.
 
10amwalker said:
Sorry Clubman, defined benefit.
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That changes my advice above as I was reading defined contribution. Would guess it depends on the actuarial value of his DB pension whether he has scope to make AVCs. In any case he probably cant take a €500k Tax Free/ Tax reduced Lump sum as the max lump sum will depend on his final salary and service
 
Flybytheseat said:
He may have scope to make AVCs for 2024, 2025 and 2026 of €46K per year (40% of max salary of €115K) so could potentially boost his pot by €138K.
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Currently he is working 75%- part time. He has been part time since 2024.
How are AVC's calculated in this instance ?
Is there a time limit to purchase the AVC's for 2024, 2025 and 2026 ?
 
10amwalker said:
Currently he is working 75%- part time. He has been part time since 2024.
How are AVC's calculated in this instance ?
Is there a time limit to purchase the AVC's for 2024, 2025 and 2026 ?
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Not my area of expertise but the part time work shouldn't affect the AVCs as his salary is even part time over the max salary cap for AVCs of €115K. You have to make 2024 AVCs before the 31Oct25 to avail of tax rebates.
 
10amwalker said:
My husband reached the standard fund threshold some years back and stopped paying into his pension.
He has a defined benefit pension.
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Finance Act 2024 provided for increases to the SFT as you say.

Alongside that, there was talk that an interdepartmental working group would be established to review other recommendations of the Dr Donal de Buitléir report. One of the recommendations was to look at the age-related Defined Benefit Scheme Valuation Factors used to value defined benefits accrued after 1 January 2014 (see Table in Paragraph 9 here).

For instance, the age-related factor for age 65 is 26. The report has recommended a new factor of 19.

If it's recommended that the factors be lowered, the capital value of your husband's defined benefit pension could be reduced, resulting in a potential saving. Something to keep an eye on.

No (further) AVCs should be countenanced until you have a firm handle on the capital value of the pension and more details of the particulars of the Scheme are provided (either here, or to a financial adviser).
 
AAAContributor said:
No (further) AVCs should be countenanced until you have a firm handle on the capital value of the pension and more details of the particulars of the Scheme are provided (either here, or to a financial adviser).
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Thank you for the information in relation to the recommended change in Value Factors.
We view ourselves as being very fortunate to have a Defined Benefit Pension.
Thank you for the feedback on the AVC's.
Would a financial advisor specialising in pensions be a good starting point or one of the financial experts that often post on AAM ?
What sort of information should we know about the capital value of the pension scheme and details of the particulars of the scheme ? Would Mercers provide us with this information ?
You can see that there is a big gap in my knowledge.
Many thanks.
 
Mercer have all the exact information. They're the advisors to the scheme. They're getting paid fees by the employer to administer/service the scheme. There might be an employee Trustee that your husband knows that can put the squeeze on them for a reply if he's getting nowhere himself.

I'd ask them the question about the effect that the new threshold has on his pension for 2026.

Just on the €2.2m, it might be slighly different as :

For the year of assessment 2026, the higher of €2,200,000 or an amount determined by the formula—

€2,200,000 × (A/B)

where—

A is the quarterly estimate for average weekly earnings for the third quarter of 2025,

and

B is the quarterly estimate for average weekly earnings for the first quarter of 2025.



Gerard

www.prsa.ie
 
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GSheehy said:
I'd ask them the question about the effect that the new threshold has on his pension for 2026.
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Gerard, if my husband has stopped paying into the pension scheme several years ago does he not need to start paying in again to be able to avail of the new SFT ?
 
It depends on the estimated effective capital value of his defined benefit pension now and next year. That needs to be ascertained first.
 
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