Maximum Pension Size

The Standard Fund Threshold (SFT) is the maximum allowable retirement / pension fund for tax purposes that a person is allowed to accrue during their lifetime. The current Standard Fund Threshold (SFT) Limit is €2m up until the end of 2025. For the following 4 years (2026 through to 2029), the SFT will increase by €200,000 in each of the years, so that it will be at €2.8m in 2029.

However, for planning purposes the target pension size is actually higher from a tax perspective, at €150,000 more than the prevailing SFT. So for example, with a €2m SFT in 2025, below is the breakdown:

Target Value: €2,150,000

Gross Lump Sum: €500,000

Of this €500,000 lump sum, €60,000 is withheld in tax. This is because the first €200,000 is tax free with the €300,000 balance is taxed at 20%. It may not make sense to take the full 25% lump sum when the Pension is over €2m, as any lump sum surplus above €500k is taxed at full marginal rate tax.

Net Tax Lump sum payable €440,000

75% Remainder: €1,650,000 (Into an ARF)

For the €150,000 amount above the €2m SFT, there is tax of €60,000. However, this tax offsets against the €60,000 tax on the €500,000 lump sum, meaning that €2.15m is the most tax-efficient size.