David Cullinane (Waterford, Sinn Fein)
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53. To ask the Minister for Finance if there is a statutory obligation on an insurance company to insist on the signature of a person who is in the advanced stages of Alzheimer's disease to a form in relation to the Finance Act 2016 even when the person is not in a situation to sign the form; and if he will make a statement on the matter. [3552/17]

Michael Noonan (Limerick City, Fine Gael)
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I understand that this question relates to aspects of section 14 of the Finance Act 2016, which made a number of amendments to the pension-related provisions of the Taxes Consolidation Act (TCA) 1997. I introduced these changes in order to close off certain tax-planning opportunities involving the use of Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs).

In providing very generous tax relief on contributions to private pension arrangements, the quid pro quois that when benefits are paid from the arrangements they are, generally, taxed at the owner's marginal rate. The tax planning that was taking place involved the RAC or PRSA owner never maturing or vesting the contracts involved so that the pension benefits were never paid out. The RAC or PRSA could pass to the owner's spouse or civil partner on death in a tax-free manner and, as no benefits had been drawn down, no benefit crystallisation event (BCE) arose which could give rise to a tax known as chargeable excess tax if the owner's overall retirement benefits exceeded the life-time Standard Fund Threshold (SFT) limit of €2 million or a higher Personal Fund Threshold (PFT) limit if the individual had one.

The changes made in the Finance Act 2016 ensure that all RAC and PRSA contracts will, in future, be deemed to vest no later than the owner's 75th birthday. The amendments also include transitional arrangements to provide that, in situations where the RAC or PRSA owner had attained the age of 75 years before the date on which the Finance Act 2016 passed into law i.e. 25 December 2016, their RAC or PRSA is deemed to vest on that date.

A key feature in ensuring that these anti-avoidance provisions work is that the administrator of the RAC or PRSA pension arrangement in question must have the necessary information to determine if the deemed vesting of the arrangement brings the value of the individual's lifetime pension benefits over the SFT or PFT limit, so that any chargeable excess tax arising can be determined and paid over to Revenue. To that end, the legislation (section 787R(5A)(b) TCA 1997) requires all RAC or PRSA owners whose arrangements are deemed to vest on their 75 birthday or 25 December 2016, as appropriate, to provide a declaration to their  pension fund administrator setting out the value of any prior pension benefits taken by the individual from other pension arrangements. The declaration has to be provided within 30 days of the deemed vesting of the RAC or PRSA. Where a declaration is not made, the legislation requires the administrator to assume that the individual has already "used up" their SFT or PFT limit, as appropriate, and to subject the entire value of the RAC or PRSA to chargeable excess tax at 40%. It should be noted that the legislation provides that Revenue will make any necessary adjustments where it subsequently transpires that some or all of the value of the pension arrangement should not have been charged to tax.

While the onus is on the individual RAC or PRSA owner to provide the declaration to their pension fund administrator, regardless of whether the administrator requests them to do so, I understand that administrators have taken the initiative to identify and contact clients who may come within the deeming provisions of the legislation, requesting them to provide the necessary declaration. It may be in this context, that the Deputy's constituent has been approached by the Insurance Company concerned seeking a signed declaration.

I am pleased to advise the Deputy that officials from my Department and Revenue met with representatives of Insurance Ireland during the passage of Finance Act 2016 to consider aspects of the new legislation including concerns regarding older vulnerable clients who might not be in a position to meet their obligations due, for example, to ill health. I understand that it was agreed that Revenue would address any such difficulties, brought to their attention by member companies, on a case by case basis. I am informed that this position was subsequently communicated by Insurance Ireland to its members.

In the circumstances, therefore, I would suggest that the Deputy arrange to have the relevant details relating to this case communicated to Revenue at Financial Services (Pensions), Large Cases Division, Office of the Revenue Commissioners, Ballaugh House, 73-79 Lower Mount Street, Dublin 2, D02 PX37, email lcdretirebens@revenue.ie, so that Revenue can address the issue directly with the insurance company concerned.