Terence Flanagan (Dublin North East, Fine Gael)
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Question 66: To ask the Minister for Finance further to Parliamentary Question No. 103 of 31 May 2011 the date in 2011 on which he proposes to introduce this legislation; if a title for the Bill has been introduced; and if he will make a statement on the matter. [33593/11]

Michael Noonan (Limerick City, Fine Gael)
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There have been a number of Parliamentary Questions on this matter dating back to March 2010 when the first question asked whether the rules concerning Approved Minimum Retirement Funds (AMRFs) would be amended to allow the AMRF owner access to the fund before the age of 75 years. The reply to that question indicated that it had been decided to allow such individuals, who meet the specified income requirements after retirement and before age 75, to have their AMRFs treated as Approved Retirement Funds (ARFs) to which they would have access. The reply also indicated that this change would be legislated for in due course. In my reply of 31 May last to the same question now being put to me, I stated that section 19 of Finance Act 2011 provided for the legislative change referred to.

Under the regime of flexible options on retirement introduced in 1999 and extended in Finance Act 2011 to all main benefits from retirement benefit schemes (other than Defined Benefit arrangements), the options to

· invest in an ARF, or

· receive the balance of the pension fund in cash (subject to tax, as appropriate) are subject to conditions. Prior to Finance Act 2011, the conditions included the requirements that the individual be over 75 years of age or, if younger, 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 introduced in 1999, 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.

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

- for 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.