Report - Pension SFT increase coming

[Steven Barrett]

It is a positive move. Someone on €130,000, retiring at 60 on €65,000 pension and 1.5 lump sum gets hit with a €58,000 tax bill. While they had decent earnings and a good pension, I don't think they would be consider high earners.

Salaries have increased substantially since 2014 and the pension threshold needs to keep up with it. And if you think this is just another benefit for the rich, by keeping it at €2 million, more and more "ordinary workers" will end up with massive tax bills when they retire. As we have seen with the Gardai, the pension cap is costing them in that the most senior Gardai don't want promotions. There is something wrong when you are losing your best people this way. It is an easy fix.

Interestingly, the lump sum payment isn't being increased. This is fine, the threshold was the area that needed to be addressed.

 

[ashambles]

According to Pearse Doherty 254 pensions were above 2m last year, assume he meant private pensions. https://www.irishtimes.com/politics...plated-pensions-of-elite-says-pearse-doherty/

Obviously there are some people ensuring their pensions stays under the limit and the majority of pensions are not close to being drawn down.

However at a guess there are 500,000+ private pensions, clearly for the vast majority the SFT is not an immediate problem.

In my view hitting a simple inflation adjusted 2m let alone 2.8m with average to twice average income requires consistent high personal contributions over 40+ years, a chunk of luck in fund selection, very low fees (only recently becoming available) and generous employer contributions. Most won't get anywhere close.

 

[yellowmoose]

deleted

 

[yellowmoose]

Interestingly, the lump sum payment isn't being increased. This is fine, the threshold was the area that needed to be addressed.

Was that in the press reports of the cabinet discussions or just the advisory report? Why do you think the SFT should be inflation-adjusted but the lump sum shouldn't? Isn't inflation universal?

 

[Gordon Gekko]

According to Pearse Doherty 254 pensions were above 2m last year, assume he meant private pensions. https://www.irishtimes.com/politics...plated-pensions-of-elite-says-pearse-doherty/

Obviously there are some people ensuring their pensions stays under the limit and the majority of pensions are not close to being drawn down.

However at a guess there are 500,000+ private pensions, clearly for the vast majority the SFT is not an immediate problem.

In my view hitting a simple inflation adjusted 2m let alone 2.8m with average to twice average income requires consistent high personal contributions over 40+ years, a chunk of luck in fund selection, very low fees (only recently becoming available) and generous employer contributions. Most won't get anywhere close.

I presume that’s 254 people with private pensions who paid Chargeable Excess Tax. Not surprising. The amount of people who haven’t yet triggered the tax or who are stuck at €2m would be much larger.

 

[Dr Strangelove]

Someone on €130,000,

I don't think they would be consider high earners.

Average full-time earnings economy-wide are about €55k.

I’d estimate that no more than 5% of public service workers make it to career end with that kind of salary. Generally these people are those with highest skills and it doesn’t make sense for them to retire early or resist career progression.

So I am in favour of reforming the SFT, but let’s not kid ourselves that it impacts large numbers of people.

 

[Dr Strangelove]

Why do you think the SFT should be inflation-adjusted but the lump sum shouldn't? Isn't inflation universal?

Donal de Buitléar is a very smart guy.

The SFT means some of a pension pot is taxed punitively. The TFLS means that another part is not taxed at all. This is hardly efficient and probably not equitable.


In de Buitléar’s report the SFT would be indexed to inflation. Meanwhile he is quietly suggesting that the TFLS be eroded by inflation over time.

Over time this would mean the whole pension pot being taxed at closer to the same rate.

 

[yellowmoose]

Donal de Buitléar is a very smart guy.

The SFT means some of a pension pot is taxed punitively. The TFLS means that another part is not taxed at all. This is hardly efficient and probably not equitable.


In de Buitléar’s report the SFT would be indexed to inflation. Meanwhile he is quietly suggesting that the TFLS be eroded by inflation over time.

Over time this would mean the whole pension pot being taxed at closer to the same rate.

i imagine the tfls was envisaged to allow retirees to pay off outstanding debts eg mortgage. I dont see why those debts wouldnt increase generally along with inflation.