I am advised by the Revenue Commissioners that tax relief is provided at an individual’s marginal income tax rate on amounts contributed to pension schemes (subject to limits). Relief is also provided on contributions made by the employers to such schemes. In addition the amount of profits and gains generated by the investments held by those pension schemes is exempt from tax. Pension benefits are taxable at the individual’s marginal rate, so the amount of tax due will depend on the individual’s personal circumstances. There may be an opportunity to take part of the pension benefit as a tax-free lump sum but this depends on the rules of the pension scheme and is subject to an overall limit of €200,000. When the pension benefits are drawn down they become taxable at the individual’s marginal rate.
There are no circumstances, other than ill health, where a member less than 50 years of age is allowed to make cash withdrawals from an on going pension scheme. However, as a concession in the case of scheme wind-ups where the value of an individual member’s fund is less than €2,000, Revenue allows a once off taxable payment to the individual. It was clarified to the organisation concerned in May 2012 that such payments are subject to tax at the individual’s marginal rate of tax. I am informed that the Revenue Commissioners issued a reply on 20 September 2012 to the representations made by the organisation involved outlining their position on this matter.
