Pension Lump Sum Calculator Ireland

How pension lump sums are taxed in Ireland

Retirement lump sums are commonly described as “tax free”, but the Irish rules contain lifetime thresholds.

Revenue states that the tax-free amount is a lifetime entitlement of €200,000 on retirement lump sums from all sources.

The next cumulative band, from €200,001 to €500,000, is taxed at the standard Income Tax rate of 20%.

Amounts above the cumulative €500,000 threshold are taxed under PAYE at the individual’s marginal rate.

The important word is cumulative.

A person does not receive a new €200,000 tax-free allowance for every pension plan.

For a broader explanation and examples, read the pension lump-sum tax guide. For the accumulation side, use the Pension Projection Calculator to model contributions and growth before retirement.

The 25% personal-pension rule

For a personal pension, a person can generally take 25% of the fund as a retirement lump sum.

If a personal pension fund is €400,000, 25% is €100,000.

If the fund is €800,000, 25% is €200,000.

But the amount that is actually tax free still depends on how much of the €200,000 lifetime allowance has already been used.

This distinction matters because “25% lump sum” and “tax-free lump sum” are related concepts, not identical rules.

Occupational pensions can be different

Occupational pension schemes can calculate lump-sum entitlement using salary and service rather than simply 25% of a pension fund.

That means the fund value alone may not tell you the correct retirement lump sum.

Advanced mode therefore includes a custom lump sum field.

If your scheme administrator has provided a formal lump-sum quotation, enter that figure in Advanced mode. The calculator will then use the scheme amount instead of 25% of the fund.

It still applies the lifetime tax bands to the current payment after taking previous retirement lump sums into account.

Previous lump sums matter

Revenue’s rules consider relevant retirement lump sums received previously.

A person who has already taken €150,000 of relevant retirement lump sums has only €50,000 remaining within the €200,000 lifetime tax-free band.

If that person then takes another €100,000 retirement lump sum:

• €50,000 falls within the remaining tax-free allowance;
• the next €50,000 falls within the 20% cumulative band.

The calculator therefore asks for previous retirement lump sums since 7 December 2005.

This field can materially change the result.

The €200,001 to €500,000 band

Once cumulative retirement lump sums exceed €200,000, the next €300,000 of cumulative lump sums is taxed at 20%.

This is sometimes called the standard chargeable amount.

For example, if cumulative lump sums before the current payment are €200,000 and the current retirement lump sum is €100,000, the full current €100,000 falls into the 20% band.

Estimated tax:

€100,000 × 20% = €20,000

Estimated net current lump sum:

€80,000

Amounts above €500,000

Where cumulative retirement lump sums exceed €500,000, the excess is taxed under PAYE at the individual’s marginal rate.

Advanced mode allows a marginal PAYE rate to be entered for this slice.

The default assumption is 40%, which is a common higher-rate scenario, but the actual treatment depends on the taxpayer’s wider Income Tax position.

This is intentionally an assumption rather than a hard-coded statement that everyone pays exactly 40%.

What the calculator does with the current lump sum

The calculation follows the cumulative thresholds in sequence.

First, it identifies the total previous retirement lump sums entered.

Second, it calculates the current lump sum:

• 25% of the fund in Basic mode; or
• the custom lump sum entered in Advanced mode where that override is used.

Third, it determines what portion of the current payment falls into:

• the remaining tax-free lifetime band;
• the 20% band; and
• the above-€500,000 band.

Finally, it estimates the current tax and net lump sum.

The calculator also shows cumulative retirement lump sums after the payment.

What happens to the rest of the pension

The retirement lump sum is only one part of the retirement decision.

For a personal pension, the remaining funds may be used for retirement-income options depending on the arrangement and applicable rules.

These can include:

• purchasing an annuity;
• transferring to an Approved Retirement Fund;
• taking another taxable pension option; or
• another route allowed by the pension arrangement.

This calculator does not model those options.

A large tax-free or low-tax lump sum can be useful, but taking the maximum available amount is not automatically the best choice for every household. Future income needs, investment risk, liquidity and estate planning can all matter.

Worked examples

€400,000 fund with no previous lump sums

Personal-pension lump sum:

€400,000 × 25% = €100,000

Previous relevant retirement lump sums: €0.

The current €100,000 sits fully within the €200,000 lifetime tax-free band.

Estimated tax: €0.

Estimated net lump sum: €100,000.

€800,000 fund with no previous lump sums

Personal-pension lump sum:

€800,000 × 25% = €200,000

With no previous lump sums, the current payment uses the full €200,000 lifetime tax-free allowance.

Estimated tax: €0.

€1.2 million fund with €100,000 of previous lump sums

Personal-pension lump sum:

€1,200,000 × 25% = €300,000

Previous lump sums: €100,000.

Remaining tax-free allowance: €100,000.

Of the current €300,000:

• €100,000 is within the remaining tax-free band;
• €200,000 falls into the 20% band.

Estimated tax:

€200,000 × 20% = €40,000

Estimated net current lump sum:

€260,000

Previous lump sums already total €500,000

Assume previous relevant retirement lump sums total €500,000 and the current lump sum is €100,000.

No tax-free allowance or 20% standard-chargeable band remains.

The full current amount sits above the €500,000 cumulative threshold and is taxed under PAYE at the marginal rate.

At a 40% modelling assumption, estimated tax would be €40,000.

Method and limitations

Basic mode calculates a personal-pension lump sum as 25% of the fund entered.

Advanced mode can replace that figure with a custom scheme lump sum.

The tax calculation then places the current lump sum into the cumulative lifetime bands after previous retirement lump sums:

• up to €200,000 cumulative: tax free;
• €200,001 to €500,000 cumulative: 20%;
• above €500,000 cumulative: PAYE at the marginal rate assumption.

The calculator does not determine:

• whether a pension scheme permits the lump sum;
• whether salary-and-service rules produce a different occupational-scheme entitlement;
• whether every prior payment entered is a relevant retirement lump sum;
• the tax treatment of the remaining pension assets;
• ARF or annuity taxation;
• pension provider charges;
• Standard Fund Threshold issues; or
• the user’s full PAYE position.

Use provider documentation and Revenue guidance for the final retirement calculation.

Frequently asked questions

Is 25% of my pension tax free?

Not automatically. A personal pension can generally provide a 25% retirement lump sum, but the tax-free treatment is limited by the €200,000 lifetime allowance across relevant retirement lump sums.

What is the maximum tax-free pension lump sum?

The current lifetime tax-free retirement-lump-sum limit is €200,000.

Is the €200,000 limit per pension?

No. It is a lifetime limit across retirement lump sums from all sources.

How is a lump sum above €200,000 taxed?

The cumulative amount from €200,001 to €500,000 is taxed at 20%.

What happens above €500,000?

The portion above the cumulative €500,000 threshold is taxed under PAYE at the individual’s marginal rate.

Do previous retirement lump sums count?

Yes. Relevant previous retirement lump sums are taken into account when applying the lifetime thresholds.

Can an occupational scheme use a different lump-sum calculation?

Yes. Occupational pension schemes can use salary-and-service rules. Advanced mode lets you enter a scheme-quoted lump sum directly.