Section 17 Finance Act 2013 introduced a new section 782A into the Taxes Consolidation Act (TCA) 1997 which provides members of occupational pension schemes with a three-year window of opportunity to draw down, on a once-off basis, up to 30% of the accumulated value of certain AVCs made by them, including additional voluntary PRSA contributions made to AVC PRSAs.
I understand that pension retirement bonds, otherwise known as Buy-out-Bonds (BoBs), are single premium insurance policies effected by the trustees of an occupational pension scheme on behalf of a scheme member, as an alternative to providing a preserved retirement benefit under the scheme for that member. Transfers to a BoB may also include AVCs made by the pension scheme member.
At the time of the introduction of the AVC access provision, it was indicated at meetings which officials of my Department and the Revenue Commissioners had with pension industry representative bodies that where there was clear evidence that the transfer value to a BoB included AVCs, the individual concerned could avail of the AVC access option in respect of the AVC value in accordance with section 782A TCA.
The pre-retirement access to a portion of AVCs which I introduced in Budget and Finance Act 2013 is, by definition, restricted to AVCs. It does not apply to core pension savings. Extending the access provision to BoBs generally, without regard as to whether the BoB includes transfers in respect of AVCs, would be to allow access to such core pension savings. If I was to permit such access in relation BoBs, there would be little rationale argument against extending it to all core pension savings including occupational pension schemes PRSAs and retirement annuity contracts. I am not prepared to go down that road.
In my view, it is preferable not to allow early unplanned withdrawals of core pension savings as the inevitable result is to divert savings initially intended to finance retirement to meet other short term financial needs. This clearly poses retirement income adequacy issues and the impact of the early withdrawal of pensions savings on the ultimate value of the pension pot at retirement should not be underestimated.
For these reasons, I have no plans to extend the measure beyond AVCs.