Ulick Burke (Galway East, Fine Gael)
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Question 158: To ask the Tánaiste and Minister for Finance if he will initiate a process that superannuation benefits be preserved retrospectively for all public servants with more than ten years service, who left the public service prior to 1 June 1973 in the case of civil servants and prior to 1 October 1976 in the case of members of An Garda Síochána; and if he will make a statement on the matter. [4555/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have primary responsibility for the Civil Service pension arrangements and an approving role in relation to public sector pensions generally. As you are aware preservation of superannuation benefits only came into force in respect of retirements from 1 June 1973 onwards in the Civil Service and 1 October 1976 in the case of members of An Garda Síochána. Any officer retiring before the minimum retirement age (60 years ) prior to these dates has no preserved civil/public service pension entitlement. The position of former officers in this situation has been considered on a number of occasions in the past. However, it has been concluded that any change to accommodate these officers would have policy and cost repercussions in the wider public service; accordingly, no change has been made.

I should also point out that the Commission on Public Service Pensions examined this issue. Taking account of a number of factors (including the fact that, prior to the introduction of preservation, the foregoing of pension was clearly understood to be an integral part of the decision to leave the public service prior to retirement age) the Commission did not recommend any change in the conditions which were applied when preservation of benefits was first introduced into public service schemes. Former public servants who take up subsequent employment in the public service may, depending on the circumstances and subject to certain conditions, opt to reckon prior service for pension purposes. The elimination of the compulsory retirement age in 2004 may facilitate some people in this regard.

Joan Burton (Dublin West, Labour)
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Question 159: To ask the Tánaiste and Minister for Finance his views on implementing a floor, in terms of a nominal amount held in the ARF account under which those whose pensions have matured and have been put into an ARF approved scheme would be exempt from withdrawing the minimum 1%, rising to 3%, from their pension accounts annually; and if he will make a statement on the matter. [4556/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The 2006 Budget and Finance Act introduced an imputed or notional distribution of 3% of the value of the assets of an Approved Retirement Fund (ARF) on 31 December each year, where the notional amount will be taxed at the ARF owner's marginal income tax rate. Funds actually drawn down by ARF owners will be credited against the imputed distribution in that year to arrive at a net imputed amount, if any, for the year.

As a transitional measure, the 3% rate is being phased in over the period 2007 to 2009, with 1% applying in 2007, 2% in 2008 and the full 3% in 2009 and each subsequent year. The new regime applies to ARFs created on or after 6 April 2000 where the ARF holder is 60 years of age or over for the whole of a tax year. The new provisions do not impact on Approved Minimum Retirement Funds (AMRFs), although funds drawn from an individual's AMRF can also be credited against that individual's imputed ARF distribution. This measure was introduced because the internal review of tax relief for pensions provision undertaken by my Department and the Revenue Commissioners in 2005 (and which was published in early 2006) found that the ARF option was largely not being used as intended to fund an income stream in retirement, but instead was being used to build up funds in a tax-free environment over the long-term.

The imputed distribution measure is designed to encourage the use of ARFs as intended. The level of the imputed distribution at 3% is not excessive, especially since ARFs are supposed to provide an income stream in retirement for their owners and that actual drawdowns can be credited against the imputed amount. In regard to the Deputy's proposal, the introduction of a floor in terms of the value of assets held in an ARF below which the notional distribution provisions would not apply would undoubtedly give rise to opportunities for individuals to seek to avoid the notional charge. This could be done by splitting the proceeds of their pension funds, or an existing ARF, into multiple ARFs, the asset value of which would be below the floor. There would be pressure to increase the floor from those whose ARF value was marginally above the floor. Indeed, there would very likely be continuous pressure to adjust the floor upwards as investment returns increased ARF values over time. All of this would likely give rise to a more complex ARF tax regime. For these reasons, I have no plans to introduce a floor, as proposed.