Dáil Éireann Debate, Tuesday - 25 October 2011
241 Deputy Eoghan Murphy asked the Minister for Social Protection if her attention has been drawn to the fact that approved retirement funds are liable to PRSI at class S and those with an annuity of an equal amount are exempt from paying PRSI; and if she will make a statement on the matter. [30844/11]
View answerUnder social welfare legislation any payments received by way of pension are not regarded as reckonable emoluments for the purposes of self-employed Pay Related Social Insurance (PRSI). Pension annuities provide a secure means of converting savings into pension income to be paid over the span of the individual's life and thereby avoid the danger that pensioners could exhaust their pension savings in their lifetime. Annuities payable under a retirement annuity contract are, therefore, regarded as a payment by way of pension and not subject to PRSI.
Approved retirement funds or ARFs are funds managed by a qualifying fund manager into which an individual may invest the proceeds of their pension fund when they retire. The income and gains of such funds are exempt from tax within the fund. Any amounts withdrawn from an ARF are referred to as a distribution. A distribution is treated as income from an employment and accordingly subject to income tax within the PAYE system. Unlike annuity products, ARFs are not pensions but are treated as assets. As such, distributions from ARFs fall within the charge to self-employed PRSI. It should however be noted that only distributions made before pension age will attract the charge to PRSI as social insurance only applies to individuals between the ages of 16 and 66. Once the individual reaches pension age, PRSI will not be charged.
