Daniel took retirement benefits in 2020 from a PRSA valued at €2.5m. He took a lump sum of €500,000, of which €300,000 was taxed at standard rate, and the balance transferred to an AMRF and ARF. Assuming he took no other retirement benefits previously and is only entitled to the Standard Fund Threshold in 2020, what chargeable excess tax was deducted from his PRSA on maturity in 2020?

• A. €140,000
• B. €82,000
• C. €200,000
• D. €205,000

Answer: (A)

The key idea is chargeable excess on a PRSA when the fund value at maturity exceeds the Standard Fund Threshold (SFT). In 2020, the SFT is €2,000,000. Daniel’s PRSA is €2,500,000, so the excess above the threshold is €500,000.

The chargeable excess tax on that excess is 40% of €500,000, which equals €200,000. However, the tax already paid on the lump sum portion taken at retirement—€300,000 taxed at the standard rate (20%)—amounts to €60,000 of tax. This tax on the lump sum is credited against the chargeable excess tax due.

Net chargeable excess tax deducted from the PRSA on maturity is €200,000 minus €60,000, which is €140,000. The transfer of €200,000 to AMRF/ARF doesn’t change this net calculation for the chargeable excess deduction. Therefore, the amount deducted is €140,000.