Richard Bruton (Dublin North Central, Fine Gael)
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Question 498: To ask the Minister for Finance the reason participants in defined contribution schemes are obliged to invest the residue in an annuity; the further reason a different option of investing in a flexible retirement fund is available to persons with PRSA; and the cost of allowing participants in defined contribution schemes the choice of purchasing an annuity or participating in a fund. [29018/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Prior to the passing of the Finance Act, 1999, any person going on pension under a defined contribution scheme or a retirement annuity contract was required to purchase an annuity with the remaining pension fund moneys, following the drawdown of the appropriate tax-free lump sum.

The Finance Act, 1999 introduced changes which gave a significant degree of flexibility and personal choice to certain categories of individual in relation to the drawing down of benefits from their pension plans. These choices include the options to purchase an annuity, receive the balance of the fund in cash (subject to tax, as appropriate) or to invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF). Proprietary directors, self-employed individuals and certain employees/directors in non-pensionable employment represent the categories of individual who can exercise these options in relation to their pension plans. The Finance Act, 2002 introduced the Personal Retirement Savings Account (PRSA) the aim of which was to create an attractive alternative pension product which is flexible, portable and user-friendly. The flexible options relating to the drawing down of pension benefits also apply to PRSAs.

While these flexible options for drawing down pension benefits are not available to members of employers' defined contribution schemes (who are outside of the categories of individual described above) in respect of benefits derived from standard contributions to the schemes, the flexible options do apply in respect of any Additional Voluntary Contributions (AVCs) made by such members either to their main schemes or to separate AVC schemes.

As regards the cost of extending the options to members of defined contribution schemes generally, I am informed by the Revenue Commissioners that the data available in relation to such schemes is not sufficient to enable a reliable estimate of the cost to be provided.