Mary Hanafin (Dún Laoghaire, Fianna Fail)

This section makes a number of changes to certain pension-related tax provisions contained in the Taxes Consolidation Act. The section restates the formula used for calculating the annual notional distribution amount from an approved retirement fund which amount is subject to tax at the fund-owner's marginal income tax rate. The restatement is to clarify and to put beyond doubt that the rate to apply for 2010 and subsequent years is 3% of the assets in the approved retirement fund at 31 December each year. The section also amends the legislation dealing with the lifetime limit on benefits that can be drawn down from tax relieved pension funds. This limit is known as the standard fund threshold and currently stands at about €5.4 million. In certain cases a higher fund limit, known as a personal fund threshold, can apply.

On each occasion that an individual becomes entitled to a benefit under his or her pension scheme referred to in the legislation as benefit crystallisation event, part of that individual standard or personal fund threshold is used up. Where the total value of benefits taken exceeds the individual standard or personal fund threshold, the excess is subject to a penal tax charge. The legislation sets out the various types of benefit crystallisation events that can arise, for example, when an individual takes a tax-free lump sum, a pension or an annuity or opts to transfer the pension fund assets to an approved retirement fund. This section effectively amends the definition of benefit crystallisation event to ensure that where an individual first accesses his or her pension benefits held in a personal retirement savings account, say by taking a tax-free lump sum, and opts to leave the remainder of the pension assets in the PRSA rather than purchasing an annuity with them or transferring to a NARF, the act of leaving the assets in the PRSA will itself constitute a benefit crystallisation event in its own right. Without the amendment, those assets would not count towards the using up of the individual standard or personal fund threshold. From the date of publication of the Finance Bill, the potential loophole in the legislation has been closed. Finally, the section introduced the requirement for the electronic delivery of certain information to the Revenue Commissioners in respect of small, self-administered pension schemes which are generally single member schemes. This is with a view to improving Revenue's ability to access and extract summary data for this information for the purposes of more reliably estimating the cost of pension tax relief for such schemes.

Question put and agreed to.

Sections 17 to 19, inclusive, agreed to.

SECTION 20.

Question proposed: "That section 20 stand part of the Bill."