The standard fund threshold (SFT) on Irish pensions has been at the same level since 2014, but in January much-called-for changes finally came into effect.The threshold represents the maximum pension fund that can be accumulated under attractive tax relief.The changes mean that pension savers can now put aside more for their retirement without onerous tax rates kicking in, as the threshold has increased by €200,000 to €2.2 million. Not only that, but the threshold will continue to rise each year until 2029 and beyond.“It’s good news,” Munro O’Dwyer, a partner at PwC, says. “It gives much greater capacity for someone to fund their pension benefits.”But, from a pension tax planning perspective, how should retirement savers change their approaches? Is there anything in these changes for the non-millionaire pension savers?The thresholdUntil 2005, there was no limit on how much people could accumulate tax efficiently in a pension fund while still being subject to the normal rates of taxation on this income in retirement.However, that year the government introduced a cap on tax-relieved pension fund investment – the SFT – for the first time at a level of €5 million. Once a pension fund went over this threshold, anything above the threshold became subject to something called chargeable excess taxation. Levied at a rate of 40 per cent, this excess tax is charged on top of other taxes once the fund is crystallised, giving rise to a potential combined tax rate of 71 per cent on any funds over the threshold as the excess income is drawn. Back in those early days, the threshold increased each year on the back of indexation, touching €5.4 million, before it was slashed back to €2.3 million in December 2010. From the start of 2014, it was cut even further, back down to €2 million where it has stayed until now.Typically, people who might have been approaching the €2 million limit would look to withdraw their pension benefits earlier than they might otherwise have planned. This is because once the amount saved is under the standard fund threshold at the point of retirement, those retirement funds can continue to grow in a structure such as an approved retirement fund, known as an ARF. Dialling down investment risk to lower returns and the risk of exceeding the threshold was another approach used.[ Will auto-enrolment obligations limit what I can invest in my private pension? ]However, amid growing concern at the difficulty in filling top jobs in the public sector due to this penal chargeable excess tax on pensions, it was announced in 2024 that the threshold would increase over a number of years. The SFT rose by €200,000 in January and it is to increase by the same amount over the next three years. That means it will stand at €2.8 million by 2029. Thereafter, the threshold will be indexed to wage growth, which means it will reach €3 million shortly thereafter. “It’s a significant amount of money,” O’Dwyer says. “The much bigger positive here is the fact that people who are in their 50s, and would be impacted by the €2 million, can now plan differently.”Standard Fund Threshold: What Ceiling AppliesYear€20252,000,00020262,200,00020272,400,00020282,600,00020292,800,00020302,800,000+Source: Revenue It certainly does take the pressure off those at the upper end of retirement savings. Laura Reidy, director of wealth management with Cantor, says she has been navigating the SFT path with a “good cohort” of clients who would have been approaching the €2 million limit. She says the change will offer more flexibility when planning. Of course, a pension fund in excess of €2 million sounds far beyond the reach of most of us; the average amount saved in an Irish pension scheme is closer to €111,000 after all.A fund of close to the threshold does offer a handsome annual income. According to Irish Life, if you were, for example, to buy an annuity with a €2 million lump-sum, you would be looking at an annual income of about €109,000, based on an annuity rate of 5.442 per cent.Increasing that sum to what will be the top rate of the SFT in 2029 – €2.8 million – gives an annual income of about €152,000 based on this annuity rate.TaxationSo pension savers will now be able to put more away for their latter years without hitting that the threshold, but if they do go over the revised standard fund threshold, chargeable excess tax at a rate of 40 per cent will still apply – perhaps because it brings in significant tax. According to the Revenue Commissioners, it collected €50.1 million under this tax heading in 2025, up slightly from €49.9 million in 2024. For now, the rate of chargeable excess tax will remain where it is despite criticisms that it is too high. In Donal de Buitléir’s independent review of the issue for the Department of Finance in 2024, he argued that the chargeable excess tax at 40 per cent was “penal” and he recommended that a rate of 10 per cent would be a sufficient disincentive as it would mean that effective tax rate on the excess benefits over the threshold would still be more than the top marginal rate of tax. The best the Government is offering is a commitment to review the rate by 2030, so there is a chance it might change over the coming years. “I can certainly see a clear logic from reducing this rate down from 40 per cent,” O’Dwyer says. Reidy agrees that a reduction “still might happen”.Approaching the thresholdFor now, when it comes to pension planning, those with big pension funds still need to keep a close eye on how close to the threshold they might be to avoid this onerous tax.“There is clearly a step to be taken to consider deferring the point of accessing your pension benefits,” O’Dwyer says, as next year the threshold will have jumped by another €200,000.Another option that has been used until now, and one that will likely continue to be popular in terms of managing the retirement process, is structuring retirement savings in various personal retirement savings accounts (PRSAs). As Reidy notes, this allows a retirement saver to enter retirement on a phased basis, as they can access one PRSA, take out what they want to access and leave everything else in an accumulating PRSA.“It’s very much a case of trying to optimise their expense and income in a tax-efficient manner,” she says.Those who have turned off employer pension contributions in recent years to stay within the threshold face a stiffer challenge as O’Dwyer notes it may not be “that straightforward to unwind”.It will depend on your circumstances, but “needs a little bit of thought”, he says. Normal pension saversThe changes to the SFT are focused on a relatively small cohort of higher earners. But pension experts are hopeful for some changes going forward that could benefit a wider group of people.Reidy would like to see “more harmonisation” across pensions and, in particular, PRSA funding, which she argues should be brought into line with occupational pension schemes, an “anomaly” that exists as a result of the Finance Act 2024. As of now, when a company contribution is made to a PRSA that exceeds 100 per cent of an employee’s salary, it is treated as benefit in kind. [ Changes to tax relief on employer contributions to PRSAs are unfair on business owners ]On the €115,000 annual limit on earnings against which tax relief on contributions is assessed – a figure that has been unchanged for 15 years – Reidy would like to see this revised upwards. “It promotes healthier savings habits for long-term retirement planning,” she says. She also would like to see pensions examined more through a gender lens, noting that a possible help here would be for couples to be able to share a cumulative pension limit between them. “Anything that discourages pension saving should be looked at,” Reidy says.