Mary Mitchell O'Connor (Dún Laoghaire, Fine Gael)
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206. To ask the Minister for Finance if the scheme for drawing down 30% of AVCs is operational; the rate of tax that is payable; and if he will make a statement on the matter. [27825/13]

Michael Noonan (Limerick City, Fine Gael)
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I assume that the Deputy is referring to the arrangements for limited pre-retirement access to Additional Voluntary Contributions (AVCs) which I announced in my Budget 2013 speech. Finance Act 2013 was passed into law on 27th March and section 17 of the Act, which makes provision for the pre-retirement access to AVCs announced in the Budget, has effect from that date. Section 17 introduces a new section 782A into the Taxes Consolidation Act 1997 which provides members of occupational pension schemes with a three-year window of opportunity to draw down, on a once-off basis, up to 30% of the accumulated value of certain AVCs made by them, including additional voluntary PRSA contributions made to AVC PRSAs. Where AVCs are subject to a pension adjustment order, both parties to the order may exercise the option independently in respect of their respective “share” of the AVCs.

The procedures set out in the legislation for exercising the AVC access option are straight forward and I have outlined these hereunder. However, in addition to these procedures, I am aware from discussions which my Department and the Revenue Commissioners have had with various pension industry representative bodies, that the administrators of AVC funds have been putting administrative procedures and systems in place to facilitate the access option at an operational level.

The likelihood is, of course, that an individual contemplating availing of the option will firstly contact his pension fund administrator by phone or email to establish what he or she needs to do. In that regard, the legislation requires the individual to give an irrevocable written instruction to the administrator of the fund that he or she wishes to avail of the option. Provided the individual qualifies for the encashment option, the administrator acts on the instruction by determining the value of the AVC fund and paying an amount, not exceeding 30% of the value, to the individual subject to deduction of the appropriate amount of tax. The amount paid is treated as emoluments to which Schedule E applies and tax is collected at source under the PAYE system. The legislation requires the administrator to deduct tax at the higher rate of 41%, unless the administrator has received from Revenue a tax credit certificate in respect of the individual. The payments are specifically exempt from USC and PRSI.

I am advised by the Revenue Commissioners that, in advance of any payment of AVCs being made, the individual exercising the option should contact his or her Revenue Office for a Certificate of Tax Credits and Standard Rate Cut-off point in respect of the AVC payment. It may be the case that the pension fund administrator will contact Revenue on behalf of the individual, but where the individual is applying directly to Revenue he or she would need to advise Revenue of the pension fund administrator's registered number (i.e. employer number) so that Revenue can forward the Certificate to the correct administrator. The Certificate will indicate the Standard Rate Cut-off Point and tax credits, if any, appropriate to the AVC access payment and facilitate the deduction of the correct amount of tax by the administrator.