Vol. 517 No. 2
11 Dr. Upton asked the Minister for Finance if he will give an assessment of the impact made by the alterations comprised in the Finance Bill, 1999, in respect of occupational and other pensions; and if he will make a statement on the matter. [9337/00]
In last year's Finance Act, I introduced significant changes to the pension arrangements for the self-employed and proprietary directors. First, the new arrangements increased significantly the tax deductible amounts which the self-employed can set aside each year to fund their retirement benefits. Depending on age and occupation, amounts of up to 30% can now be set aside.
Second, these arrangements introduced a greater degree of personal choice and flexibility in relation to the drawing down of benefits for the self-employed and proprietary directors. The old rule which forced pensioners to take out an annuity was abolished and, instead, the self-employed and proprietary directors now have the option of choosing between purchasing an annuity, receiving the balance of the fund in cash, which would be taxable apart from the lump sum, or investing in either an approved retirement fund, ARF, or an approved minimum retirement fund, AMRF. An ARF or AMRF allows the individual control over how the pension fund is invested during his or her retirement and also allows the individual to retain ownership of the fund and to pass on any balance remaining in the fund following his or her death.
I believe that these arrangements, which I introduced last year, have proven to be very popular and have been widely welcomed by both beneficiaries and also by the pensions industry. However, during the course of the last year, I received a number of representations highlighting certain issues that arose following the introduction of these new pension arrangements and also requests for an extension of the new arrangements. Consequently, following full consideration of the issues raised, I made a number of additional changes to the pension rules this year in the Finance Act, 2000.
Most significantly, I have introduced gross roll up for ARFs and AMRFs. This means that from 6 April next, tax will only be paid when the money leaves the fund, rather than the present system of taxation of the investment proceeds while the money is in the fund, with further tax being levied, in certain circumstances, when the money is taken out of the fund. In addition, I made a number of other changes, which are as follows. Proprietary directors who control more than 5% of the shares in their company can now avail of the new arrangements; previously the ownership requirement was 20%. Individuals whose pension date has passed but who have not yet invested in an annuity can now avail of the new pension options instead. The new pension choices have been extended to those using AVCs, that is, additional voluntary contributions, to build up their pension rights. I removed certain anomalies in the tax treatment of children who inherit moneys in an ARF or AMRF and, lastly all qualifying pension fund managers will now be subject to regulation by an independent regulatory agency in the State or in another EU member state.
I am satisfied that the pension arrangements that I brought in last year combined with the improvements which I recently introduced, will be of significant benefit to both the individual pension holders as well as to those operating in the pension industry. It is not yet possible to estimate the degree to which those retiring have availed of the option to take out an ARF. However, given the degree of interest and welcome shown to the new arrangements, I am satisfied that they have had considerable impact to date.
I tabled this question to find out the take-up. I accept that there may be some difficulty in assessing this. However, surely it is possible at this stage to estimate the number of people who have taken the opportunity to invest or set aside more than the previous maximum of 15% of their total salary, in order to avail of the tax-free allowance. That information should have been available from the end of January.
I do not have the details but I am sure it is not available yet. The Revenue garnered this information from the returns of self-employed persons. The year 1999-2000 is the first year in which the new rules will apply. If I remember my tax law correctly, a return for the year 1999-2000 will not have to be filed until 31 January 2000. This is the first year of the scheme and I would say the take up will be small. It will be some time before we have the information requested by the Deputy.
The Revenue Commissioners, quite properly, undertook a significant campaign to encourage people to take up the new options. Has the Minister made any arrangements for the Revenue Commissioners or others to assess the number of people taking up those options?
We should be in a position later this year to give the Deputy further information in that regard. The Revenue Commissioners produced a fine booklet on the details of this scheme although it is not their job to sell this concept. The financial institutions were not hesitant in trying to sell these new arrangements. Given the changes I have made, some of which were requested by the financial institutions to make the operation of the scheme easier, there will be a greater take-up this year. It will be some time before we know the numbers but I will give any information I have to the Deputy. I am sure the Revenue Commissioners or the industry will conduct a survey during the year.
It would be helpful, though not necessary, to have some means of assessment before moving forward.
