Éamon Ó Cuív (Galway West, Fianna Fail)

Approved retirement funds or ARFs are funds managed by a qualifying fund manager into which an individual may invest the proceeds of his or her pension fund on retirement. 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 Any amounts withdrawn from an ARF are referred to as a distribution.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. However, unlike annuity products, ARFs are not pensions but are treated as assets. As such, distributions from ARFs fall within the charge to self-employed PRSI.

There has been no recent change in legislation pertaining to this area but my Department recently clarified to qualifying fund managers that, as the legislation stands, they are required to apply the appropriate PRSI when making distributions. In this regard it may be noted that only distributions made before pension age will attract the charge to PRSI, as social insurance only applies to individuals between the ages of 16 and 66.

My Department, working with the Department of Finance, the Revenue Commissioners and the Pensions Board, is currently engaged in a review of ARFs and the interaction between PRSI and pensions in the context of the national pensions framework. This review will have particular regard to the necessity to achieve the correct balance between ensuring that the social insurance fund is supported by contributors and providing incentives for people to save for retirement.

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