Budget
2014 reduced the standard fund threshold (SFT) from €2.3m to €2m.
This
means that, when an individual accesses their pension benefits, if the value of all pensions
held by that individual exceeds €2m, the excess will be subject to an effective rate of tax of
up to 70%!
While
a fund of €2m may seem quite large, it in fact equates to an annual income in
retirement of around €50,000 so it may affect more pension savers than you
would initially imagine.
In a
recent survey conducted by Independent Trustee Company, 75% of the advisors
polled said that securing the €2.3m PFT
for their clients was of high importance.
There is a window of opportunity available, but you must act quickly.
Where
an individual has existing benefits in excess of €2m at 1st January
2014, Revenue will allow them to apply for a personal fund threshold (PFT) and
that threshold will apply to them instead of the SFT. The maximum PFT available is €2.3m. Depending on your clients’ circumstances, it
may therefore make sense for them to contribute to their scheme before the end
of the year in order to secure a PFT for the full value of their benefits. Contributions made after 1st
January 2014 cannot be included in the calculation of the PFT.
The key is to act now, before the 31st
December, while the opportunity for your clients is still available.
For
further information, please contact one of our consultants in ITC Consulting:
Barry
Kennelly on (01) 6148068 or at barry.kennelly@independent-trustee.com
Jennie
Faughnan on (01) 6035140 or at jennie.faughnan@independent-trustee.com
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