Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

This section amends section 787K of Part 30 of the Taxes Consolidation Act to remove the upper age limit on personal retirement savings accounts, PRSAs. The amendment implements a recommendation of the report of interdepartmental pensions reform and taxation group with a view to improving and simplifying the pension regime in Ireland and leading towards a whole-of-life PRSA.

A PRSA is a personal pension product jointly approved by Revenue and the Pensions Authority. Revenue approves PRSAs for the purposes of the tax relief, subject to the rules set out in Chapter 2A of Part 30 of the Taxes Consolidation Act. Currently, an annuity cannot commence to be payable, or other assets made available, to the PRSA contributor before the age of 60 or after the age of 75. This amendment removes the upper age limit of 75 years on accessing PRSA assets. On retirement, a PRSA holder is entitled to take a tax-free lump sum of 25% of the fund, subject to the maximum allowance of €200,000. After this the remaining funds can be used in any combination of the following ways: to purchase an annuity, to take as a taxable lump sum, to transfer to an approved retirement fund, or to maintain in the PRSA.

Where the funds are maintained in the PRSA, the beneficiary has the facility to draw down an income as they see fit. Drawdowns are taxable under Schedule E and the normal annual thresholds apply.

Under the current treatment, when the beneficiary reaches the age of 70 and has not commenced taking benefits from the scheme, the fund is deemed to vest and the PRSA holder is not permitted access to the fund any longer – in other words, the person can no longer drawdown from the PRSA. The imputed distribution regime, which is an annual deemed distribution from the fund, still applies to vested PRSAs. By removing the upper age limit for PRSAs, it makes the product a viable alternative to an ARF. PRSA holders will still be permitted to draw down from their funds as they see fit from age 75 onwards. The fund is still deemed to vest, leading to a benefit crystallisation event for the purposes of the standard fund threshold, but the beneficiary is not locked out of their fund. This enables the PRSA to be used as a whole-of-life product.

I am happy to support the recommendation of the IDPRTG and I commend the section to the committee.