Mary Upton (Dublin South Central, Labour)
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Question 140: To ask the Minister for Finance if his attention has been drawn to the fact that persons who do not have a yearly pension income of at least €12,700 are only allowed on maturity of their pension fund, to withdraw 25% of the full amount of the fund in a tax free lump sum and if they do not want to invest the balance of the fund in an annuity, that they are obliged to place the next €63,500 of their pension in either an annuity or an approved minimum retirement fund; and if he will make a statement on the matter. [34817/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy is referring to elements of the flexible options on retirement introduced in the 1999 Finance Act which allow certain categories of individual considerable flexibility and freedom in relation to the drawing down of benefits from their pension plans. Previously, such individuals would have been required to purchase an annuity with the pension fund moneys remaining after the draw-down of the appropriate tax-free lump sum. The option to have all or part of an individual's accumulated pension fund placed in an Approved Retirement Fund (ARF) on retirement, after drawing down the appropriate tax-free lump sum, is open to a qualified person (generally a proprietary director, self-employed individual and certain employees or directors in non-pensionable employment) who has a guaranteed income actually in payment for life of at least €12,700 per annum.

Where the guaranteed income requirement is not met, then an Approved Minimum Retirement Fund (AMRF) must be chosen into which the first €63,500 of the remaining pension fund (after taking the tax free lump sum), or the whole of the remaining fund if less than this amount, must be invested. Alternatively, an annuity can be purchased with the first €63,500 of the pension fund and the balance placed in an ARF. The capital in an AMRF is not available to an individual until he or she reaches 75 years though any income generated by the fund can be drawn down subject to tax. In essence the AMRF becomes an ARF when the person reaches 75 years of age. The purpose of an AMRF is to ensure a capital or income "safety net" for the relevant individuals throughout the period of their retirement.

As outlined in the National Pensions Framework published earlier this year, the Government has decided to extend these flexible options on retirement to members of Defined Contribution occupational pension schemes in respect of the main benefits from such schemes (they can already avail of the flexible options in relation to any additional voluntary contributions they have made). The implementation of this aspect of the Framework (committed to from 2011) is being examined, as are other aspects of the current arrangements. For example, the guaranteed income limit (€12,700) has not been changed since the introduction of the flexible options in 1999. In addition, the Government is aware that individuals who invested their funds in an AMRF because they did not satisfy the specified income requirements at retirement, may later satisfy those requirements. Notwithstanding this, such individuals are effectively locked into the AMRF until they reach 75. The Government has decided to allow those individuals who meet the specified income conditions after retirement to have their AMRFs treated as ARFs to which they will have access.