5 Things You Need To Do As You Approach the Pension Fund Threshold

In this article, our team will bring you through the 5 Things You Need To Do As You Approach the Pension Fund Threshold.

In summary, If your pension is heading towards the €2 million pension fund threshold, you now have a bit more breathing room but also more complexity. The Standard Fund Threshold (SFT) is staying at €2 million until the end of 2025, then rising in €200,000 steps from 2026 to 2029, when it will reach €2.8 million. For high-net-worth investors, this creates both opportunity and risk. In this blog, we look at what happens if you go over the limit, the real drawbacks, and five practical steps to take as you approach the threshold.

Here Are The 5 Considerations:

1. Understand the New Threshold Timetable

Right now, the SFT is €2 million. From 2026, it’s due to rise as follows:

• 2025: €2.0m
• 2026: €2.2m
• 2027: €2.4m
• 2028: €2.6m
• 2029: €2.8m

After 2029, the plan is for the SFT to increase annually in line with average earnings, not inflation.

Crucially:

• The tax-free lump sum cap stays at €500,000, it no longer moves in step with the SFT.
• The Chargeable Excess Tax (CET) on benefits over the SFT remains at 40%.

So you have more room to build your pension, but the penalty for crossing the line is still very heavy.

2. Know Exactly What Happens If You Go Over the Threshold

Let’s take a simple example using today’s rules.

Example: Fund over the threshold in 2029

Assume it’s 2029, the SFT is €2.8 million, and your total pension benefits at retirement are €3.1 million.

• SFT in 2029: €2.8m
• Your fund: €3.1m
• Excess over SFT: €3.1m – €2.8m = €300,000
• Chargeable Excess = €300,000
• Revenue applies Chargeable Excess Tax (CET) at 40% on that €300,000 = €120,000
• You can offset some of this tax with any tax you have paid on your €500,000 lump sum in the case 20% of €300,000 = €60,000.
• Final tax bill €300,000 @ 40% i.e. €120,000 less tax paid on lump sum €60,000 = €60,000

That €60,000 is taken off the top before you draw benefits. You’re left with €3.04m inside the pension structure – but that €3.04m is still taxable as you draw it (income tax, USC, and potentially PRSI, depending on how and when it’s taken).

So on the excess:

• You pay 40% up-front CET, and
• You still face income tax on withdrawals later.

For many HNW clients, the effective tax rate on the excess can end up well north of c. 70% once everything is factored in.

That’s why, for someone already close to the limit, continuing to “stuff” the pension can become tax-inefficient very quickly without a proper strategy.

3. Track How Much of Your SFT You’ve Already Used

Another subtlety many people miss: when you take any pension benefits, you’re treated as having used a percentage of the SFT at that time, and that same percentage applies as the SFT rises later.

Example (based on Revenue’s approach as explained in recent provider guidance):

• In 2025, with an SFT of €2m, you crystallise €1m of benefits.
• That uses 50% of the €2m SFT.
• In 2026, the SFT rises to €2.2m – you are still treated as having used 50%, meaning you now have 50% of €2.2m = €1.1m of headroom left.
• As the SFT steps up to €2.4m, €2.6m and €2.8m, your remaining euro amount of SFT also increases – but the percentage you’ve used stays the same.

For clients on the cusp of the limit, timing crystallisations (and which pots you take, when) becomes a serious planning lever.

4. Reassess Whether Further Pension Contributions Still Make Sense

Once your combined pensions (including DB valuations) are within, say, a few hundred thousand euro of the future SFT, you should be asking:

“Is another €1 of pension contribution actually helping me, or am I just creating a future 40% CET problem?”

There’s no single right answer, but sensible options often include:

• Reducing or stopping employer and employee contributions once the SFT is clearly in sight
• Redirecting surplus cash to non-pension investment structures (corporate or personal)
• Reviewing risk and return assumptions – if your strategy is likely to push you significantly over €2.8m by 2029, you need a plan for that excess

The key point: at a certain level of wealth, the pension stops being the only or even the best tax shelter. Overshooting the SFT blindly is one of the big, avoidable own goals for HNW investors.

5. Build a Joined-Up Strategy Across Pensions and Investments

Approaching the Standard Fund Threshold is not just a technical tax issue – it’s a strategic one.

You want a plan that:

• Maps out your projected pension value against the SFT path (2025–2029 and beyond)
• Factors in defined benefit entitlements, using Revenue valuation rules
• Sets clear rules for when to crystallise, and in what order
• Coordinates with your ARF strategy, business assets, investment companies, and family wealth planning
• Balances tax efficiency with flexibility and your real-life goals (retiring, selling a business, gifting to children, etc.)

For the clients I work with, the SFT is rarely the only constraint. It sits alongside succession planning, business exits, lifestyle goals, and what you actually want life to look like after “work” in the traditional sense.

Final Thought: The Threshold Is a Signal, Not a Disaster

If your pension is approaching €2 million, or will clearly pass €2.2m / €2.4m / €2.6m / €2.8m based on current projections, this isn’t a reason to panic – but it is a reason to plan.

Used well, the phased increases between 2026 and 2029 give you:

• More room to accumulate tax-relieved pension wealth, and
• Time to design the right mix of pension and non-pension assets for the rest of your life.

 If you would like to learn more about your pension fund options, our team would be happy to talk you through your case. Contact Us.

Disclaimer

Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.

All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.