Seán Fleming (Laois, Fianna Fail)
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166. To ask the Minister for Finance the position regarding trivial pensions in which the amount invested is less than €20,000; if these can be cashed in; the rules in circumstances in which this fund is required by the person concerned for urgent purposes; the rules in circumstances in which the pension was taken out over 20 years ago; and if he will make a statement on the matter. [32932/17]

Seán Fleming (Laois, Fianna Fail)
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167. To ask the Minister for Finance the position regarding persons with small pension funds; the rules regarding the location in which a person can cash these in if the person is under 60 years of age; and if he will make a statement on the matter. [32935/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 166 and 167 together.

I am advised by Revenue that the commutation of small or trivial pensions is allowable in certain limited circumstances.

Where, on retirement and following the payment of any lump sum the total of all funds available for pension benefits is less than €20,000 Revenue will not object to the payment of a once off pension to an individual instead of the purchase of an annuity, once the agreement of the scheme beneficiaries and trustees has been received. The quantum of retirement benefits from all sources must be taken into account when calculating this €20,000 limit. The applicable rates of tax, USC and PRSI are those applicable to any other pension payment.

Full commutation is also permitted by Revenue on triviality grounds where, on retirement, the aggregate pension benefits payable to an employee under all schemes related to an employment do not exceed the value of €330 per annum. Tax on the chargeable part of such payments is at a rate of 10%, under Schedule D Case IV.

Both of these options are only available at a point where an individual is entitled to draw down benefits from a scheme, i.e. where they reach the retirement age set out in the conditions of their scheme, or are entitled to access benefits for other reasons, such as serious ill health.

Should an individual move their pension fund to another jurisdiction they may be subject to different draw down rules depending on the jurisdiction; however any transfer of pension funds offshore must be for bona fide reasons and must not contravene tax legislation or undermine pension tax policy.

Moving pension funds off-shore in an effort to circumvent the requirements of Irish pension tax legislation may fall foul of the conditions under which a pension scheme was approved by the Revenue Commissioners as an exempt approved scheme or the conditions under which a Personal Retirement Savings Account (PRSA) product received Revenue approval. This could result in the withdrawal of the approval of an occupational pension scheme in accordance with the provisions of section 772(5) of the Taxes Consolidation Act (TCA) 1997 or the withdrawal of the approval of the PRSA product under section 787K (3) and (4) TCA 1997. Any such withdrawal of approval could trigger significant tax liabilities on the sums moved off shore and the withdrawal or claw back of tax reliefs. Moreover, in such cases and depending on the circumstances and the motivation of the individual concerned, the possibility also arises that such transactions may also fall foul of the legislation designed to counter tax avoidance transactions.

The essential feature of any pension policy is to provide income for an individual in retirement. The rationale for giving tax relief for contributions to various types of retirement products is to encourage savings over the long term so that individuals will have an income in old age. There are a number of reasons why pre-retirement access to benefits from pension plans or schemes is not permitted, the principal one being that these arrangements are designed to be long term savings vehicles based on the principle that the benefits will be maintained to help fund an adequate income in retirement.

Given that the correct treatment of a pension in situations such as this depends on the facts and circumstances of the case, if the Deputy has concerns regarding the fund of a particular individual it may be advisable to contact Revenue directly outlining the facts of the case to obtain a comprehensive answer on the available options.