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

This is an issue that was discussed on Committee Stage and with the Acting Chairman's permission, as amendments Nos. 5 and 10 are related to subsections (2) and (6) of section 17, as passed on Committee Stage, I propose to deal with them together.

These substitutions deal in one way or another with the temporary rescinding of certain provisions included in the Finance Act 2011 relating to ARF access conditions, which were introduced in the context of the extension of the ARF option to all defined contribution occupational pension arrangements at that time. The impact of the Deputy's amendments would be to continue with the more challenging conditions attaching to accessing the ARF option, which my changes are designed to ease, for a transitional period and which will have the greatest impact on those with modest pension incomes and modest pension savings.

It emerged during the debate on Committee Stage that there may be some concern or misunderstanding about the motivation behind the changes I have proposed. It may help to clarify the situation, therefore, if I explain the background and the rationale for the changes in more detail.

The flexible options at retirement are the ARF option, as it is commonly referred to, which was introduced in 1999 to give certain individuals with mainly defined contribution type pension arrangements more choice, flexibility and control regarding the use of their pension funds at retirement at a time when the only available option was to purchase a pension annuity. Such annuities were viewed as poor value at the time partly because of the fact that in most cases the annuity effectively died with the annuity holder and left nothing to be handed down through the annuity holder's estate. The ARF option was later extended to all holders of additional voluntary contributions.

Today, retiring individuals in defined contribution pension arrangements still have the option to purchase an annuity but as an alternative they can draw down their remaining pension pot after taking the tax free retirement lump sum by way of a taxable lump sum or invest it in an approved retirement fund, that is, the ARF.

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