I assume the Deputy is referring to the tax treatment of retirement lump sums paid from public service occupational pension schemes. The following arrangements currently apply to retirement lump sums paid under pension arrangements approved by the Revenue Commissioners, and also to retirement lump sums paid from public service occupational pension schemes.
- Lump sum amounts up to €200,000 are paid free of tax. They are also paid free of USC.
- The portion of a lump sum between €200,001 and 25% of the Standard Fund Threshold (currently €500,000) is taxed on a ring-fenced basis at the standard rate (currently 20%). This means that no tax credits or other tax reliefs can be set against this portion of the lump sum. No USC is chargeable.
- Any amount of a lump sum in excess of €500,000 is taxed at the individual's marginal rate of tax (credits and other tax reliefs are available). In this instance, USC is chargeable on the excess.
I would also point out that the €200,000 tax-free amount is a lifetime limit and applies to a single lump sum or, where an individual is in receipt of lump sums from more than one pension product, to the aggregate of those lump sums. In addition, retirement lump sums taken on or after 7 December 2005 and before 1 January 2011 (the date the current regime was introduced) must be taken into account in determining the tax-free amount (if any) appropriate to a retirement lump sum paid on or after 1 January 2011.