Dáil Éireann Debate, Tuesday - 8 September 2020
306. Deputy John Lahart asked the Minister for Finance the rules governing the withdrawal of funds from private pensions; if a consumer can withdraw all of their money while paying the relevant tax without the assistance of external tax or financial consultants; and if he will make a statement on the matter. [22306/20]
Amharc ar fhreagraWithdrawals from private pensions before retirement are only possible in certain limited circumstances – for example, where an employee leaves a pensionable employment and receives a refund of contributions made to the associated pension scheme. Such refunds are governed by the rules of individual pension schemes and are usually only permitted where the individual has less than two years of “qualifying service” in the employment.
In relation to withdrawals from private pensions after retirement, the manner in which funds may be withdrawn varies depending upon the type of pension product. Occupational Pension Schemes and Retirement Annuity Contracts (RACs) typically provide for the payment of a lump sum and/or a regular pension income, the level of which is dictated by the terms of the pension product into which the savings were originally invested. Alternatively, RACs and Personal Retirement Savings Accounts (PRSAs) can be used to either purchase an annuity, which will provide an income in retirement, or alternatively may be invested into an Approved Retirement Fund (ARF) on retirement.
As is normally the case in respect of any of their tax obligations, it is a matter for the individual taxpayer to judge themselves whether the assistance of external advice is required, having regard to the complexity of the issue that is raised and the nature of the pension scheme they have entered into. Revenue have published detailed guidance on tax obligations that may arise in respect of pensions which is available at https://www.revenue.ie/en/tax-professionals/tdm/pensions/index.aspx
Regular pensions in payment are subject to income tax deduction at source under the PAYE system. Lump sums on retirement may be paid tax free subject to certain limits. The deduction and remittance to Revenue of taxes due on the pension is administered by the pension provider, rather than the pensioner.
An Approved Retirement Fund (ARF) is a post-retirement personal fund which allows an individual greater flexibility over investment options. An ARF holder may withdraw all funds from an ARF, provided that they have retirement income separate to the ARF income in excess of €12,700. Withdrawals from an ARF are subject to income tax deduction at source under the PAYE system, which is also administered by the ARF provider rather than the ARF holder.
