The budget is only seven weeks away and the speculation around what it might hold is gathering momentum. With Tánaiste Simon Harris recently repeating his mantra about the importance of “rewarding work”, increasing the point at which workers pay the higher rate of income tax appears to be firmly on the table. Some cost-of-living measures are also expected.
While it’s important that the Government rewards workers, this should also include those who have worked all their lives and who are either retired, or who soon will be.
An increase of at least €10 to €15 in the weekly State pension appears to be on the cards for budget day on October 6th. While such an increase will be welcome, the Government needs to do more to improve the lot of the retired or those near retirement.
Many would struggle to make ends meet on the State pension alone and for this reason, a lot of people supplement the State pension with a private pension.
Recent years have seen an unhelpful narrative build up around the pensions of high earners, the offshoot of which appears to be a reluctance from the Government to support high earners or entrepreneurs with their pensions, even going so far as to penalise them by restricting the extent to which they can tax-efficiently plan for their retirement.
In 2025, for example, the Government did a U-turn on measures brought in under the Finance Act 2022 which had rightly recognised the need to give business owners, often nearing retirement, the chance to catch up on their pensions in a tax-efficient way.
As a result, the amount of tax relief entrepreneurs can claim on their Personal Retirement Savings Account (PRSA) was substantially reduced, and since then many business owners have been unable to catch up on years of underfunding their pension, meaning they have effectively been punished for prioritising their business over their personal retirement.
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Thankfully, there was some progress on this front at the start of this year when a long-overdue change to the taxation of large pension pots kicked in. That change saw the limit on the total capital value that an individual can draw down from tax-relieved pension arrangements over their lifetime increase for the first time in more than 10 years. That limit, known as the Standard Fund Threshold (SFT), increased from €2 million to €2.2 million in January 2026. That increase to the SFT marked the first in a series of uplifts to the threshold as a result of changes brought in under the Finance Bill 2024.
New research reveals just how important those changes are to high earners. A significant proportion of high earners are likely to either delay or bring forward their retirement in order to make the most of the changes to the SFT, according to a survey we conducted of 215 financial advisers.
Asked how they expect the SFT increases to affect retirement timing for high-earning clients, more than two-thirds (64 per cent) of advisers said many high earners would retire later to maximise their pensions, while about 15 per cent said some would retire earlier.
The increases to the SFT give high earners an opportunity to reduce or possibly avoid what would otherwise be a significant tax bill on their pensions.
The SFT is to increase by €200,000 a year between now and 2029, meaning the current threshold of €2.2 million will increase to €2.4 million in 2027, €2.6 million in 2028 and €2.8 million in 2029.
From 2030 onwards, the threshold will be indexed to wage growth. As 40 per cent tax is charged to those whose pension pot exceeds the SFT, it’s not hard to understand why those with big pension funds need to keep a close eye on how close to the threshold they might be.
The SFT largely affects high earners and long-serving professionals whose pension funds are large enough to approach or breach the current €2.2 million limit. This has attracted the ire of some commentators and politicians, who dub such individuals “pension millionaires”, and believe that those with multimillion-euro pension pots don’t deserve or need any help with their pensions, including the SFT increases.
While it’s true that the SFT only benefits a small cohort of high earners and that a pension fund in excess of €2.2 million is far beyond the reach of most people, it is our view that there was strong merit in the Government’s decision to increase the SFT.
These people have invariably contributed far more to the exchequer in tax paid over their lifetime and should be rewarded rather than penalised for saving well for their retirement.
In an era when there is so much concern about the sustainability of the State pension and when higher living costs and greater longevity have increased the importance of saving up an adequate retirement income, the Government should be doing its utmost to encourage all people to save into their pension – the higher SFTs are just one way that the Government has done so.
Higher SFTs could also facilitate those who wish to work beyond the normal State retirement age of 66 – something the Government is clearly trying to encourage more people to do.
There are plenty of examples of Government support for low- and middle-income earners when it comes to pensions. The recently launched auto-enrolment scheme is a case in point.
Auto-enrolment is targeted at those earning an income of between €20,000 and €80,000.
The non-contributory State pension, which is offered to those who haven’t paid enough social insurance contributions over their lifetime to qualify for the contributory State pension, is another example.
Yes, it’s important to have fairness and equity in the Irish pension system. Everyone deserves a fair crack of the whip when it comes to planning for their retirement – whether they’re a high or low earner. Anything less is penalising people who have put their heads down, worked hard and saved up for their retirement.
Glenn Gaughran is head of business development with the Independent Trustee Company
