During the day children should stop using pacifiers by age 4 but sometimes they stop using the pacifier before age 4.
Some kids just suddenly stop using the pacifier on their own and sometimes you need to force the issue of removing the pacifier.
If the child is 4 years old and still using the pacifier during the day then it needs to be taken away but at night it's okay.
The main reason you want to stop pacifier use in the day for children 4 and older is because they could be made fun of in public and they certainly cannot go to preschool or kindergarten with a pacifier because they will be tormented by other kids in the school.
At night a child may still need to use a pacifier past age 4 and that's okay but during the day it should not be used.
It's not bad for a toddler or older kid to sleep with a pacifier.
If the toddler sleeps better with the pacifier then there's no need to worry about it or get rid of the pacifier until they are ready.
Most kids will give up the pacifier on their own by age 4 years old but if not then you may need to just take it away from them.
Pacifier use past age 4 can lead to speech delays and make it hard for the child to be understood so it's okay for the child to have the pacifier at night at age 3 and 4 years old and even at 5 years old if that's what helps them sleep.
However if the child is 4 or 5 years old they should not use a pacifier during the day as it can mess with their teeth.
One of my kids slept with his pacifier until 7 years old but he stopped using the pacifier during the day at age 3 but wanted to use it at night.
Kids grow up so fast anyway and if the pacifier comforted him at night at age 7 that's okay.