Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Amendment No. 22 tabled by Deputy Doherty proposes to delete the proposed new section 782A(2) of the principal Act in section 16, which provides for the reversal of the more stringent ARF access conditions introduced in the Finance Act 2011. It may help to inform the discussion on the amendment if I outlined the rationale for the reversal of the 2011 charges. The relevant ARF access conditions hold that before an individual can invest in an ARF he or she must have a minimum guaranteed pension income for life or, in the absence of that minimum level of pension income, he or she must set aside part of the pension pot in an approved minimum retirement fund which, in general, cannot be accessed until the individual reaches the age of 75.

In the Finance Act 2011 the minimum guaranteed pension income requirement was increased from €12,700 per annum to an amount equal to 1.5 times the State pension contributory. This figure is currently €18,000. The increase in the maximum set aside amount required to be placed in an approved minimum retirement fund, AMRF, went from €63,500 to an amount equal to ten times the rate of the State pension contributory. This amounts currently to €119,800. These changes were made in the context of the extension in the Finance Act 2011 of the ARF option to all defined contribution main scheme benefits. I imagine Deputy Doherty would agree that the level of pension income in pension fund savings figures reflected in the ARF access conditions indicate that the individuals most impacted by the changes made in 2011 were not high earners but people on modest pension incomes or with modest pension savings.

I have received representations about the fact that these changes which represented relatively significant overnight increases to the limits were introduced without the provision of adequate transitional arrangements. It has been put to me that it was unfair that many individuals who had been planning for retirement based on the original requirements of the legislation were suddenly faced, and continue to be faced, with having to meet more stringent conditions without a sufficient period of transition during which the old rules would continue to apply. This is the reason I have decided to reinstate the old limits of €12,700 and €63,500 for a limited period of three years. In effect the Deputy is proposing that the case for such temporary transitional arrangements, which would mostly affect individuals with modest means, should not be entertained and on that basis I cannot commend amendment No. 22 to the committee.

We increased limits last year for access to ARFs. In practice the changes appear to have been excessive. We did it on the basis that we were dealing with people of high income but when people began to get access it was those on relatively modest means who led the application list. It was a fair criticism that transitional arrangements were not put in place. Now, for a temporary three-year period, we are going back to the older, lower-level limits and this will allow a transitional period. Then, the higher income limits to which Deputy Doherty refers in his amendment will be reinstated, perhaps by way of legislation in 2016.