Taxes Consolidation Act 1997 section 787TA

Encashment option

Section 787TA provides a one-off encashment option allowing individuals with both private and public sector pension arrangements to encash their private pension rights, in whole or in part, so as to eliminate or reduce the chargeable excess that would otherwise arise when their public sector pension crystallises.

• A "relevant individual" who is an active member of a public sector scheme and also holds private sector pension rights may irrevocably instruct the scheme administrator to encash the private pension where the combined value of both pensions would exceed the standard fund threshold (SFT) or personal fund threshold (PFT).
• The encashment amount is treated as income chargeable under Case IV of Schedule D at the higher rate of income tax, with no deductions, reliefs or credits available against it; the tax-free lump sum is eliminated on full encashment and restricted proportionately on partial encashment.
• Transitional rules apply where the private sector pension was accessed before 8 February 2012: the deemed encashment amount depends on the type of benefit crystallisation event that occurred, and the qualifying fund manager or PRSA administrator (rather than the scheme administrator) is responsible for deducting the tax.
• The individual and the scheme administrator, qualifying fund manager or PRSA administrator (and, where relevant, the public sector scheme administrator) are jointly and severally liable for the encashment tax, regardless of residence status.