Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Regarding the Deputy's question as to whether it is payable as a lump sum, the answer is "Yes". I will ask my officials to advise me on the tax treatment of that. In the meantime, I will try to answer the remainder of her questions. In regard to the rationale for this, this recommendation was brought forward by the interdepartmental pensions reform and taxation group, which is administered by my Department and the Department of Social Protection. Broadly, the reason we are doing it here is in recognition that the ARF option is a retirement option, which has a number of advantages to it compared to how annuities are conducted. In the environment that we are in at the moment, it is becoming more accepted that ARFs represent better value for money than annuities, particularly when we are in an interest rate environment that is low. The ARF option also allows the holder to access funds in a more flexible manner.

In terms of those who will benefit from this and how they will benefit, they will have the opportunity to either purchase an ARF or to purchase an annuity. They will have more flexibility than they have at the moment. I remind the committee that this applies only to death-in-service benefits. This would happen where somebody working in our public service passes away and his or her partner, spouse or child has to make a decision about the future of that person's pension contributions. We are looking to give them more options at that point. On the question as to what would happen then, if it happens upon the sad occurrence of death, which it would in these circumstances, the lump sum will pass tax free to the spouse, but at the point it is drawn down from the ARF, it becomes subject to tax. It would be subject to normal income tax, USC and PRSI. On the question of whether we expect there to be a cost to the Exchequer overall, the answer is "No".