Frank retired from the civil service in 2020. He had a chargeable excess tax liability on his public service superannuation benefits of €100,000. What is the MINIMUM reduction in his pension Frank can agree to, in order to discharge his chargeable excess tax liability?

• A. €10,000 per annum
• B. €5,000 per annum
• C. €15,000 per annum
• D. €20,000 per annum

Answer: (B)

When a public service pension creates a chargeable excess tax liability, the tax authority allows this liability to be recovered by reducing the pension each year by a fixed amount until the liability is cleared. There is a statutory minimum annual reduction, which is €5,000. So, for a €100,000 liability, the smallest amount you can agree to reduce the pension by each year is €5,000. That would spread the liability over about 20 years (assuming the pension continues and no interest considerations alter the schedule). You could opt for higher annual reductions, but the question asks for the minimum, which is €5,000 per year.