Report - Pension SFT increase coming

Saw this in the IT editorial re lump sums, didn’t see it in thread “According to McGrath’s successor Jack Chambers, the upcoming Finance Bill will also provide for the threshold for the higher rate of taxation to apply to a pension lump sum be set at €500,000 rather than a proportion of the SFT.
 
Bluefin said:
Based on the other thread in relation to CAT and inheritance, is the tax breaks being given to people with large pension pots a good use of scarce resources?
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In my view yes. It helps prevent Brain Drain and encourages 'Brain Gain' if you like.

Ireland is an absolutely terrible place to be an investor and one of the few tax advantages normal people can strive for is a good pension pot.

I would be gone from this country in a heartbeat if I didn't have the possibility of a good retirement fund.
 
It’s ‘the people who get up early in the morning’ who keep this show on the road. High earners pay the bulk of income tax. Mega corporates pay the bulk of corporation tax. The tax breaks given to high earners are a small thank you for covering the bills that the whingers would do well to remember.
 
Could anybody with the know how please show what salary would be required for a 2.8 mil pension pot in a final salary full service public sector pension scheme?
 
First of all, there is no pension pot at all.
All public pensions, like public payrolls, are paid from current taxes

The pension pot is a notional calculation for public servants

An early post estimated it at € 100k pa
 
jpd said:
First of all, there is no pension pot at all.
All public pensions, like public payrolls, are paid from current taxes

The pension pot is a notional calculation for public servants

An early post estimated it at € 100k pa
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Remember that Gardaí retire on a full pension after 30 years. That makes their pension considerably more valuable. I can't find the link but I read before that it's about 50% of their income so a Garda on €80k a year (around the average) is getting a package worth €120k a year.
 
Fibbernacci said:
In my view yes. It helps prevent Brain Drain and encourages 'Brain Gain' if you like.

Ireland is an absolutely terrible place to be an investor and one of the few tax advantages normal people can strive for is a good pension pot.

I would be gone from this country in a heartbeat if I didn't have the possibility of a good retirement fund.
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We don't need brain-gains like Fingers Fingleton building up a 30m pension pot. In the private sector the type of people that build up crazily high pension pots are brass-necked and brass-brained highly paid bluffers in financial services. And the usual reason that sort of fund went so high is because the company had a DB pension with no salary limit and no common sense.

High paid private sector workers in productive parts of the economy usually don't have DB pensions and aren't as interested in the limits as the top staff in the DoF.

With a multimillion pension in Ireland you're going to be paying mostly high tax on drawdown from the pension and you can only draw it down in ways the DoF allow. Apart from tax free lump sum moving the various limits further up doesn't help that drawdown level of tax.

There are reasons you'd self limit before hitting official limits and invest elsewhere, in an ideal world most DC pensioners would prefer a balance of pension and non-pension wealth. (For example - anyone less than ~40 it's likely the government will eventually raise the private pension access age from 50 - so don't have all your eggs in one basket if you've one eye on early retirement)

My own suggestion for helping all levels of pension fund contributors not just the hard pressed senior staffers in the DoF - would be reintroduce relief for PRSI.
 
ashambles said:
We don't need brain-gains like Fingers Fingleton building up a 30m pension pot. In the private sector the type of people that build up crazily high pension pots are brass-necked and brass-brained highly paid bluffers in financial services
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That's a bit of a massive sweeping generalisation. A GP with a GMS Pension and a total income of €200k (below average for a fulltime GP) could easily see €40k going into their pension fund each year.
 
Purple said:
That's a bit of a massive sweeping generalisation.
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In general why need any regular employee in a typical company DC scheme who has a choice and is reasonably competetent with managing their finances put any more than the minimum required to get an employer match once they know their pension is at a level or will be at a level at retirement that means any further contributions will be leaving at the higher tax rate?

It is the easy option, the funds are familiar, and there's the lack of deemed disposal or declarations to Revenue, but the downside is it's in a pension wrapper without the attraction of reduced income taxation at drawdown- it's restricted access, there's going to be ongoing pension company fees, possibly levies.

The suggestion here seems to be that the SFT trumps drawdown taxation - ignore the likely taxation at drawdown and aim for the SFT regardless?
 
I don't think the spending from a 2-3 million pension pot need necessarily be a champagne moment for the tax man. You don't have to go full ARF. You could go annuity and then choose to be tax resident somewhere else where it is preferential. Furthermore you could use the tax free lump sum each year to offset the tax liable part and keep much of the income away from the higher thresholds.

Someone who can accumulate 30 million fingleton fingers possibly doesn't need the states help but it's beneficial for the country to present a reasonable dream to the average highly skilled worker (who also pays the 8% USC btw..)
 
Can the lump sum drawdown be split over multiple years? That would be useful.

Annuities could work out better for taxation, but sometimes won't be a viable option.

People seem to be thinking the SFT is the upper limit for private self funded pensions - when the SFT is one factor. There was no SFT up to 2006 - and PAYE people weren't using infinity as their target. From what I remember idea of the SFT was to stop wealthy people diverting their own company's income tax free into an unlimited private pension and then heading off to Malta or somewhere to draw it down.
That main target has adjusted their tax avoidance practices, so now it's a legacy of the the DoFs financial crash panic-button-pushing that it mainly affects people like the DoF themselves - bless them.

A limited example using all present day values, but from what I can see if someone aged 25 has earns 115,000k+ for 40 years and max out their tax relieved contributions every single year to 65, they've put away 1.25m. If they stop working at 55 that's 816k, or 1m at 60.

Pension fund growth and employer contrib will likely put those past the current SFT - but it gives an idea of the maximum money that individuals can use to tax efficiently fund their own pension and the distance it is from the SFT.

The vast majority of people do not max out the pension contributions every year, and many only start focusing on their pension later in their life and can't get close to the existing SFT - which ties in with the figure reported of only 254 (private sector?) people over the limit last year.
 
Not sure how most reasonably paid people wouldn’t hit the limit, I care a lot about it as a reasonably well paid professional approaching 50 who hasn’t paid full AVCs until this year, maybe 5% a year up until now. My various work pensions are only at 650k but currently at 65 I’d be that amount over the SFT and at 60 I’d be approaching current limit. This is based on what seem to be conservative SORPs
 
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