Dáil Éireann Debate, Tuesday - 16 January 2018
1660. Deputy Michael McGrath asked the Minister for Employment Affairs and Social Protection the reason a retired person under 66 years of age in receipt of income from an approved retirement fund must pay PRSI on this income whereas a person under 66 years of age in receipt of a pension annuity is not subject to PRSI on same; and if she will make a statement on the matter. [1696/18]
View answerPolicy in respect of treatment of annuities and approved retirement funds for tax and social insurance is a matter for the Minister for Finance.
The current position is that approved retirement funds or ARFs are funds managed by a qualifying fund manager into which an individual may invest the proceeds of their pension fund when they retire. The income and gains of such funds are exempt from tax within the fund. Any amounts withdrawn from an ARF are referred to as a distribution. A distribution is treated as income from an employment. It is subject to income tax and the fund manager must operate the PAYE system on it.
Under social welfare legislation any payments received by way of pension are not regarded as reckonable emoluments for the purposes of self-employed pay related social insurance (PRSI). However, unlike annuity products, ARFs are not pensions but are treated as assets. As such distributions from ARFs fall within the charge to Class S self-employed PRSI, or if the recipient of the distribution is a modified class contributor, Class K. Class K PRSI contributions do not give entitlements to any social insurance benefits.
I trust this clarifies the matter for the Deputy.
