Standard Fund Threshold

Pieface

Registered User
Messages
39
Hi,
Is the SFT determined at the moment you retire and tax paid if over the threshold? What happens if at time of retirement the threshold is not exceeded but the pension fund continues to grow (in an ARF) and say exceeds the threshold 10 years after the retirement date?

In I am in a Defined Benefit scheme, does the SFT still apply? If yes, are people expected to have separate savings in order to pay for this tax?
Thanks.
 

Conan

Frequent Poster
Messages
965
The SFT is determined on the day you draw down the benefits. In a DC scheme if the value is exceeds the fund limit (in effect this is c€2,160,000) then the excess of fund tax is deducted. What happens to the to the value when the residue (after taking the retirement lump sum) is invested into an ARF is irrelevant.
In the case of a DB scheme the Revenue have a formula for attributing a notional capital value to the DB pension. If the notional value exceeds the fund limit, then the Scheme Trustees must pay the tax from the fund and reduce your benefits appropriately.
 

Conan

Frequent Poster
Messages
965
So if you have a fund of €2.15m and take €500k as a lump sum, the tax on the lump sum is 20% of €300k - £60k. That €60k is offsetable against the excess of fund tax. So the 40% tax on €150k is c€60k.
So in reality you only pay excess of fund tax over €2.15m.
 

SBarrett

Frequent Poster
Messages
3,129
Hi,
Is the SFT determined at the moment you retire and tax paid if over the threshold? What happens if at time of retirement the threshold is not exceeded but the pension fund continues to grow (in an ARF) and say exceeds the threshold 10 years after the retirement date?

In I am in a Defined Benefit scheme, does the SFT still apply? If yes, are people expected to have separate savings in order to pay for this tax?
Thanks.
Going off on a tangent slightly, but if the fund goes over €2m, the imputed distribution increases to 6%. Also, if you have spread the funds over a number of providers, you must appoint one QFM for the imputed distribution. They will request the fund values of the other ARF's as at 30 November each year to ensure that 6% has been paid out (or if the total fund value has fallen below €2m, that 4%/5% is paid instead).


Steven
www.bluewaterfp.ie
 
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