Dáil Éireann Debate, Tuesday - 31 January 2012
134 Deputy Brendan Griffin asked the Minister for Finance his views on a matter regarding pensions (details supplied); if he will outline the person’s options; and if he will make a statement on the matter. [5220/12]
View answerIncome tax relief at an individual's marginal tax rate is allowed (within limits) on contributions made to supplementary private pension arrangements, including personal pension plans and retirement annuity contracts. Investment growth in such pension arrangements approved by the Revenue Commissioners is also exempt from tax. The purpose of these various tax relief arrangements is to allow individuals to supplement any State pension income they may be entitled to with private pension income in retirement. The use of tax-relieved private pension savings to purchase additional State pension entitlements either here or elsewhere is not permitted and I have no plans to change that position. Retirement benefits can be taken from a personal pension plan or retirement annuity contract at any time after age 60 and before age 75 without any requirement to give up work, so if the individual is 65 he is free to take his benefits. The options available are as follows:
Up to 25% of the accumulated fund may be taken as a lump sum that is tax-free up to a lifetime limit of €200,000. The options available with the remainder of the pension fund are—
to purchase an annuity,
to receive the balance of the pension fund in cash (subject to tax, as appropriate), or
to invest in an approved retirement fund (ARF).
The latter two options are subject to conditions. The conditions include the requirements that the individual be over 75 years of age or, if younger, that the individual has a guaranteed level of pension income (specified income) actually in payment for life at the time the option to effect the ARF or cash option is exercised. Finance Act 2011 increased the guaranteed level of pension income required to an amount equal to 1.5 times the maximum annual rate of the State Pension (Contributory) bringing the "specified income" limit to €18,000 per annum at present. Where the minimum specified income test is not met, and an individual does not wish to purchase an annuity, then an approved minimum retirement fund (AMRF) must be chosen into which a "set aside" amount must be invested from the pension fund equal to 10 times the maximum annual rate of State Pension (Contributory) —€119,800 at present — or the remainder of the pension fund, after taking the tax-free lump sum, if less.
