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Pension Provisions

Dáil Éireann Debate, Thursday - 15 May 2014

Thursday, 15 May 2014

Questions (69)

Catherine Murphy

Question:

69. Deputy Catherine Murphy asked the Minister for Finance if there is any flexibility in either the rate of contribution or the minimum age at which the capital of an approved minimum retirement fund may be accessed; if any changes are planned in this specific area; and if he will make a statement on the matter. [22037/14]

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Written answers

Approved Minimum Retirement Funds (AMRFs) form part of the flexible options at retirement that are available in respect of all benefits from Defined Contribution (DC) occupational pension schemes and other DC pension savings arrangements. Choices available to individuals (after taking the retirement lump sum) include the option to purchase an annuity with the remaining funds, to receive the balance of the pension funds in cash (subject to marginal rate income tax, as appropriate) or to invest the balance in an approved retirement fund (ARF).

The options to - invest in an ARF, or receive the balance in cash - are subject to conditions. The conditions include the requirements that the individual be over 75 years of age or, if younger, that he or she has a guaranteed level of pension or annuity income ("specified income") actually in payment for life at the time the option is exercised. The purpose of the specified income requirement is to ensure, before an individual has unfettered access to their remaining retirement funds via an ARF or cash that they have the security of an adequate guaranteed pension income throughout the period of their retirement. The minimum specified income requirement is €12,700 per annum at present.  Where the specified income test is not met, and an individual does not wish to purchase an annuity, then an AMRF must be chosen into which a "set aside" amount must be invested.

The purpose of an AMRF is to ensure a capital or income "safety net" throughout the latter period of an individual's retirement where their pension income is below the specified income requirement. The maximum 'set aside' amount is €63,500 of the balance of the pension fund after taking the allowable retirement lump sum, or the remainder of the pension fund if this is less than €63,500.  The capital in an AMRF is not available to an individual until he or she reaches 75 years, though any income generated by the fund can be drawn down subject to tax. However, the capital in an AMRF can be used by the owner at any time to purchase a pension annuity and the AMRF automatically becomes an ARF with access to the capital sum (subject to taxation) where the specified income test is met at any time before the age of 75. Having been increased substantially in Finance Act 2011 to €18,000 and €119,800, respectively, I reduced the specified income and AMRF "set aside" requirements to their original levels, now applying, in Finance Act 2013. In light of that, I have no plans at this time to make further changes to ARF/AMRF governing rules and requirements. I will, however, give consideration, without prejudice, to any rational proposals for change which may be put to me in the context of the next Budget and Finance Bill.

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