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Tax on lump sums at retirement

Currently, a maximum of €200,000 can be taken as a tax free pension lump sum. This is a total lifetime limit even if lump sums are taken at different times and from different pension arrangements. Lump sums between €200,001 and €500,000 are taxed at 20%, with any balance over this amount taxed at your marginal rate and subject to the Universal Social Charge.

The amount of lump sum you can take out of a pension arrangement is limited, with different rules applying depending on the type of arrangement you have.

For RACs, PRSAs and people transferring to ARFs at retirement, the lump sum limit is 25% of the retirement fund.

For a defined benefit occupational pension scheme, you may be able to take 1.5 times your final remuneration as a lump sum, if you have completed 20 years’ service and have no benefits from a previous scheme.

For a defined contribution scheme, the amount of lump sum available to you depends on whether you choose to take your benefits in the form of an annuity or an ARF.