fbpx Skip to main content

Understanding the Standard Fund Threshold Cap (SFT Cap) on Irish Pensions

Effectively Managing Standard Fund Threshold Taxation on Irish Pension Products

Taking proactive steps to understand your future pension tax liabilities and exploring opportunities to mitigate or reduce the chargeable excess tax exposure is always beneficial. The more knowledge you are equipped with, the better informed your decision-making, and the more strategic you can be when analysing and comparing potential tax planning solutions.
The Standard Fund Threshold (SFT), a cap above which additional taxation is levied against Irish pension products, is one such consideration.
With a current threshold of €2 million, Irish pension fund holders and Irish nationals living overseas with domestic retirement schemes can face significant tax obligations without advance planning.

Understanding How the Standard Fund Threshold Applies to Your Pension Wealth

The chargeable excess tax, SFT cap was first introduced in 2005, then with a threshold of €5 million. The gradual reductions since, resulting in a reduced threshold of €2 million, mean many Irish pension holders may be unaware of the threshold or that the limit they can save into a pension product without attracting additional taxation has fallen considerably.
At the point of retirement, accessing a tax-free pension lump sum or reaching a certain age, a pension investor may not realise they will trigger an SFT tax computation. This is particularly relevant if they have not revisited their retirement planning in recent years, or since the Standard Fund Threshold first came into force.
Those exposed to additional taxation pay a higher-rate tax, the Chargeable Excess Tax (CET), on their retirement savings above the threshold, with an effective taxation rate as high as 70% and above.
Therefore, assessing the efficacy of tax planning options that will prevent exposure to this level of taxation and taking decisive action far ahead of a crystallisation event, is highly advisable and could make a tangible impact to your total pension wealth.
Download our detailed Standard Fund Threshold guide for further details about how the Chargeable Excess Tax works and who may be liable.

Protecting Your Irish Pension Fund From Unnecessary Taxation

Within our complimentary guide, Malcolm McDowell our SFT specialist, explains some of the options available, ensuring you remain compliant and do not expose your retirement savings to unnecessary risk, yet remove or mitigate the likelihood of paying significant or unexpected taxation on retirement. Malcolm discusses:
  • The effective tax rate applied to Irish pension funds above the SFT.
  • How pension growth over several years can quickly reach the SFT threshold.
  • Events that trigger an SFT calculation and potential tax charge.
  • Options to transfer pensions and take advantage of EU Directives around the free movement of capital.
  • Benefits of pension transfers in terms of protection from additional taxation and access to larger tax-free lump sum drawdowns.
  • The further advantages for Irish pension holders and the potential for dual taxation against pension funds accessed from overseas.

Future-Proof Retirement Planning

Changes to your tax liability can be a pivotal factor in retirement planning, whether you intend to draw down a lump sum from your pension product, receive a regular income, have one large pension fund or several smaller schemes. Retirees with multiple pension products or with an entitlement to a defined benefit pension often find their pension valuations far exceed their assumptions, tipping them over the SFT threshold.

It is impossible to overstate the financial advantages of professional advice, understanding the options available to you to protect your pension wealth and provide for a comfortable retirement without accepting unnecessary tax liabilities that are easily avoided.

Download your copy of our free guide today as the first step to understanding how the SFT applies to your pension products and what you can do to mitigate your future tax exposure.

Download the SFT Guide

Standard Fund Threshold (SFT) Guide & Advice


If you’re concerned about how the Standard Fund Threshold (SFT) cap may affect your retirement plan, then an initial conversation with Malcolm McDowell is a positive place to start.

Feel free to download the SFT guide, ask a direct question or arrange a call below.

Trusted advice made simple