Peadar Tóibín (Meath West, Sinn Fein)
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Question 68: To ask the Minister for Finance if former miners will have their pensions reduced by 10% as a result of the 0.6% Government pension levy; the number of other pension plans and persons affected in such a manner; if it is legal that there is such a large pension reduction; if there is scope for the pension firms to take on some of this cost; and the steps he will take to help pensioners in this situation. [20856/11]

Michael Noonan (Limerick City, Fine Gael)
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The stamp duty levy of 0.6% applies to the market value, on the valuation date, of assets under management in pension funds and pension plans approved under Irish tax legislation. I cannot say what the precise impact of the levy will be on individual funds, schemes or members as this depends on whether and to what extent pension fund trustees and Life Offices decide to pass on the levy to individual members, given the particular circumstances of the pension funds or pension plans that they are responsible for. I can say that the Finance (No 2) Act 2011 provisions which introduced the levy include certain safeguards in this area.

The payment of the levy is treated as a necessary expense of a scheme and the trustees or insurer, as appropriate, will be entitled where needed to adjust current or prospective benefits payable under a scheme to take account of the levy. However, should the option of reducing scheme benefits be taken, it must essentially be applied in an equitable fashion across the different classes of scheme members that could include active, deferred and retired members. In no case may the reduction in an individual member's or class of member's benefits exceed the member's or class of member's share of the levy. The Revenue Commissioners are also afforded oversight authority to review instances where benefits are adjusted as a result of the payment of the levy to ensure that any such adjustment is made in accordance with the requirements of the levy legislation. In undertaking any such review Revenue may consult with appropriate experts as they see fit.

I take the view that there is scope for the pension fund industry to absorb the impact of the temporary pension scheme levy by way of a reduction in the fees and charges made on those schemes. I have made that clear in this House and I have conveyed that view to representatives of the pension fund industry at face-to-face meetings and in writing. I will await developments in the coming months to see if, in fact, the pension fund administrators and providers have absorbed any of the pension fund levy this year. In the light of those developments, I would intend to pursue the matter further with them in the autumn.

Michael McGrath (Cork South Central, Fianna Fail)
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Question 69: To ask the Minister for Finance the rules governing access to an approved minimum retirement fund before the age of 75 years; and if he will make a statement on the matter. [21088/11]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that Approved Minimum Retirement Funds (AMRFs) are part of the Approved Retirement Fund (ARF) regime introduced in 1999. The ARF regime gives a considerable degree of control, flexibility and personal choice to certain categories of individuals in relation to the drawing down of benefits from their pension plans. Access to the ARF regime was extended to all main benefits from retirement benefit schemes (other than Defined Benefit arrangements) in Finance Act 2011.

Under the regime an individual can take his or her retirement lump sum and, other than immediately purchasing an annuity from a life assurance company, use the remainder of the pension fund to

- receive the balance of the pension fund in cash (subject to tax, as appropriate), or

- invest in an ARF.

These latter options are subject to conditions. The conditions include the requirements that the individual be over 75 years of age or, failing that, that the individual has a guaranteed level of pension income (specified income) actually in payment for life at the time the option to effect the ARF or cash option is exercised. Finance Act 2011 increased the guaranteed level of pension income required from the previous fixed amount of €12,700 to a variable amount equal to 1.5 times the maximum annual rate of the State Pension (Contributory) bringing the "specified income" limit to €18,000 per annum at present.

Where the minimum specified income test is not met, then an AMRF must be chosen into which a "set aside" amount must be invested from the pension fund equal to 10 times the maximum annual rate of State Pension (Contributory) – €119,800 at present – or the remainder of the pension fund, after taking the tax-free lump sum, if less. Prior to Finance Act 2011, the "set aside" amount was fixed at the first €63,500 of the pension fund or the remainder of the fund after the tax-free lump sum, if less than that amount. As an alternative to going the AMRF route, an annuity can be purchased with the first €119,800 of the pension fund and the balance placed in an ARF or taken as cash subject to tax. The Finance Act 2011 changes in this area were signalled in the National Pensions Framework report which was published in March 2010.

Prior to Finance Act 2011, if the minimum specified income test was not met at the time the option to effect the ARF or cash option was exercised and the individual placed a "set aside" amount in an AMRF, that capital sum was effectively "locked in" and could not be accessed by the individual, other than to purchase an annuity, until he or she reached 75 years of age (at which point the AMRF automatically becomes an ARF) though any income generated by the fund could be drawn down subject to tax. This was the position even if the minimum specified income test was met after retirement. Finance Act 2011 changed this rule so that where the minimum specified income test is met at any time after retirement and before age 75, the AMRF automatically becomes an ARF with full access to the funds.

As a transitional measure, Finance Act 2011 allows the previous lower guaranteed income requirement of €12,700 per annum to continue to apply for a period of 3 years from the date that Act was signed into law (6 February 2011) for

- individuals who had retired before that date and who already had an AMRF, and

- individuals who availed of the deferred annuity purchase option*, had exercised the ARF (or cash) option within one month of the date of passing of Finance Act 2011 and who in exercising that option had transferred the requisite amount to an AMRF within that one month period.

This means that if such individuals satisfy the guaranteed income requirement of €12,700 within that three-year period their AMRF becomes an ARF. After this three-year period expires, the new higher guaranteed income test will have to be satisfied before the AMRF can become an ARF. The amount of guaranteed income required to meet the test will change in line with any future change in the maximum annual rate of State Pension (Contributory). *The deferred annuity purchase option was introduced with effect from 4 December 2008 for members of defined contribution occupational pension schemes and allowed them to defer the purchase of an annuity for an initial period of 2 years, in light of the fact that pension funds had been adversely affected by the falls in equity markets and the more general falls in assets values. The deferral option was operated administratively by the Revenue Commissioners. The period of deferral was subsequently extended to 6 March 2011 i.e. one month beyond the passing into law of the Finance Act 2011.