Written answers

Wednesday, 21 October 2009

Department of Finance

Pension Provisions

9:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 149: To ask the Minister for Finance his views on modifying the age at which a person is required to assign money to an approved minimum retirement fund in view of the fact that it is at age 66, not 65 years, that most people become automatically entitled to a pension of at least €12,700 as a result of their entitlements under social insurance. [37612/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Approved Minimum Retirement Funds (AMRFs) form part of the Approved Retirement Fund (ARF) options. Under the ARF regime certain pensioners can, after taking their tax-free pension lump sum, choose between investing in an ARF, purchasing an annuity, taking the remaining value of their pension fund in cash (subject to income tax) or any combination of these options. In addition, in certain circumstances, part of the individual's pension fund must be invested in an AMRF.

There is no specific age, as such, by which an individual is required to assign money to an AMRF. Indeed, whether an AMRF is required at all depends on the individual's particular circumstances. In order to exercise the ARF option in the first place, an individual must either be over 75 years of age or have, in his or her own right, a guaranteed pension income for life of a minimum of €12,700 per annum, at the point of retirement ( this is referred to as 'specified income' in the relevant legislation) . In this regard, the pension or pensions must actually be in payment – pensions anticipated at some time in the future cannot be brought into the reckoning. Pensions paid directly to a spouse or pensions/allowances received on behalf of a spouse or dependant may not be included. Where the minimum specified income test is not met, the legislation requires that the first €63,500 of the pension fund (after taking the tax free lump sum), or the entire of the remaining fund, if it is less than this, must either be used to purchase an annuity for the individual or invested in an AMRF. The individual can also satisfy this requirement by using part of the €63,500 to purchase an annuity and by placing the rest in an AMRF.

The point at which the issue of an AMRF comes into the reckoning is generally, therefore, the point of retirement of the individual and the age at which this can occur is not fixed. I understand from the Revenue Commissioners that, while it is a condition of approval of an occupational pension scheme that the scheme rules specify the age at which members will normally retire, any age between 60 and 70 is generally acceptable. In the case of personal pensions such as Retirement Annuity Contracts and PRSAs, benefits can be accessed at any time from age 60, even if the individual is still working. In light of the foregoing, the question of modifying the age at which a person is required to assign money to an Approved Minimum Retirement Fund does not arise.

I would add, that the specified income amount of €12,700 (originally £10,000) has been in place since the ARF legislation was enacted in 1999 and is not directly linked to the maximum personal rate of the contributory State pension (for a person under 80) – which stood at €5,876 (£4,628) at that time and currently stands at just short of €12,000 annually. The fact that the rate of pension has increased substantially in the last decade or so while the specified income amount for ARF/AMRF purposes has remained the same is simply an unrelated convergence of the two amounts.

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