Dáil Éireann Debate, Tuesday - 6 November 2012
239. Deputy Paudie Coffey asked the Minister for Finance the appeal mechanisms open to persons who currently have a pension bond who now wish to liquidate this bond in order to reinvest in a business, however the pension company are refusing to accede to the request; and if he will make a statement on the matter. [48148/12]
View answerRevenue approval of occupational pension schemes is given on the basis that retirement benefits may, generally, be paid at normal retirement age which cannot fall before age 60 or after age 70. Most schemes would have a normal retirement age of 65. Revenue approval may also provide, however, for early retirement from age 50 where scheme rules allow and with the employer's consent. In such situations benefits are restricted. In the case of personal pensions such as retirement annuity contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) benefits can be taken from age 60 with no retirement condition. Buy-out bonds, are Revenue approved policies or contracts of assurance into which occupational scheme benefits have been transferred and which can be availed of by members of occupational pension schemes leaving service or where schemes are winding-up. Benefits can be taken at the same time as were available under the original occupational scheme.
I am advised by the Revenue Commissioners that in relation to all of these pension arrangements benefits can be taken at any stage where retirement is due to serious ill-health or incapacity.
Where retirement benefits are taken in any of the circumstances outlined above, pension benefits drawn down by an individual (after taking any tax-free retirement lump sum that may be due) are subject to tax, generally at the individual's marginal rate of income tax.
I have no plans to amend the above arrangements for accessing pension benefits.
There are a number of reasons why, under existing policies, early withdrawals of pension savings are not permitted, the principal one being that pension schemes and plans (and the associated tax reliefs) are designed as long term savings vehicles to provide an income in retirement based on the principle that the savings will be "locked away" until that time. This, in effect, is the quid pro quo for the tax relief which is available to encourage long term saving for retirement.
There are also issues around pension funds investing in a beneficiary's own business. The first is the protection of pension benefits. In other words it would not be possible to protect pension and death benefits if the pension funds were to be invested in a company or business resulting in the possibility that the pension scheme or plan might ultimately be unable to pay the pension benefits on the retirement of the beneficiary or beneficiaries. Secondly, tax legislation in relation to pension saving arrangements seeks to ensure that the investment transactions of the pension arrangements are conducted on a commercial 'arm's length' basis. It does this by effectively rendering transactions that are not arm's length tax inefficient by deeming the amount or value of the pension schemes assets used in such transactions to be a pension payment and, therefore, subject to income tax.
