Michael McGrath (Cork South Central, Fianna Fail)
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127. To ask the Minister for Finance the options open to a person with a PRSA contract when drawing down the maximum amount of a tax-free lump sum and-or purchasing an annuity either before the PRSA contract matures or at the date of maturity; the position regarding the person's rights in this regard; and if he will make a statement on the matter. [32132/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that the relevant legislation setting out the treatment of PRSAs is contained in Chapter 2A of Part 30 of the Taxes Consolidation Act (TCA) 1997. Except in limited circumstances, benefits can not be drawn down until the individual is at least 60 years of age, as set out in section 787K of the TCA 1997.

The amount of lump sum that can be taken on retirement depends on the type of PRSA, and the rules of the individual scheme, as set out in section 787G(3)(a) of the TCA. For a PRSA linked to an occupational pension scheme into which Additional Voluntary Contributions (AVCs) have been made, the lump sum available is based on the scheme rules, the individuals length of service and their final earnings, with 150% of final salary being the maximum lump sum available based on 20 years service. For other PRSAs, on the first occasion that benefits are taken from the PRSA up to 25% of the fund may be taken as a retirement lump sum.

The maximum cumulative tax-free total of all retirement lump sums that an individual can take from all pension arrangements is €200,000. Any lump sums taken in excess of this cumulative life-time limit are subject to taxation at a rate of 20% on the next €300,000, and at the individual’s marginal income tax rate plus USC on any balance.

A PRSA from which retirement benefits have commenced is referred to as a vested PRSA, as defined in section 790D of the TCA 1997. The balance of the fund after the 25% lump sum may be retained in the PRSA, used to purchase an annuity, or to exercise the Approved Retirement Fund (ARF) options, subject to certain criteria.

An individual who retains the balance of a PRSA after payment of the retirement lump sum may then draw down from that balance as and when they choose. The amounts drawn down from a vested PRSA are generally treated as emoluments and are subject to tax under Schedule E at the individual’s marginal rate.