Access Prior to Retirement to Additional Voluntary Contributions (AVCs)

There will be a once-off option for members of occupational pension schemes to withdraw up to 30% of their AVC fund. This option will be available for 3 years from the passing of the Finance Bill (expected early April 2013). “AVCs” include additional voluntary PRSA contributions to an AVC PRSA (Personal Retirement Savings Account).

• The option is available in respect of AVCs paid to provide benefits in retirement but does not include AVCs paid for the purposes of purchasing notional service. The definition of AVCs refers to the status of the contribution made. This appears to be a measure to ensure that withdrawals are allowed only in cases of genuine AVCs.

• Where an AVC fund is subject to a Pension Adjustment Order (PAO), both the scheme member and the spouse or civil partner or former spouse or civil partner of the member may exercise the option independently in respect of their respective ‘‘share’’ of the AVC fund.

• Amounts paid under this option will be subject to income tax under PAYE. Unless a certificate of tax credits and standard rate cut-off is provided, the higher rate of tax (41%) will apply. Payments will not be liable to the Universal Social Charge (USC). It is intended to exempt them from PRSI in the next Social Welfare and Pensions Bill (date to be confirmed).

A reminder of other pension-related measures flagged in the Budget

• The Minister decided against changing the current tax relief arrangements for 2013 and clarified that tax relief on pension contributions will remain available at the marginal rate of tax.

• The annual net relevant earnings cap remains unchanged at €115,000.

• The age-based contribution percentages, on which maximum tax deductible pension contributions by employees and self-employed individuals are based, remain unchanged.

• The Minister did indicate that, from 2014, arrangements will be put in place to cap subsidies for pension funds delivering an income of more that €60,000 per annum.

• The Finance (No. 2) Act 2011 introduced a pension levy of 0.6% of fund value to apply for four years on company pensions, buy out bonds, personal pensions and PRSAs. The Minister confirmed in December that this levy would not extend beyond 2014.




Every effort has been made to ensure that the information in this publication is accurate at the time of going to press. Irish Life Assurance plc accepts no responsibility for any liability incurred or loss suffered as a consequence of relying on any matter published in oromitted from this publication. Readers are recommended to take qualified advice before acting on any of the matters covered.

Approved Minimum Retirement Fund (AMRF) and Guaranteed Income Limits

There will be a reinstatement of the requirements of a €63,500 investment in an AMRF or pension annuity (previously €119,800 since February 2011), or possessing a guaranteed yearly income of €12,700 per annum (previously €18,000 since February 2011) before an individual can invest in an Approved Retirement Fund (ARF).

• These reduced limits are to apply for 3 years, from the passing of the Finance Act 2013 (expected April). Therefore these limits are likely to be in place until the Finance Act in 2016 when the higher limits will then be reapplied.

• This means that for someone retiring today, the higher AMRF and guaranteed income limits still apply, but this could be altered in a matter of months. Some clients may consider holding off taking retirement benefits until this change has actually been introduced.

Other provisions apply to individuals who have taken benefits since the introduction of the higher limits on the 6th February 2011:

• Where on or after the date of the passing of the Finance Act 2013, such individuals have a specified income of at least €12,700 per annum, any AMRF they have immediately becomes an ARF.

• Where on the date of the passing of the Finance Act 2013, such individuals have specified income of less than €12,700 per annum then, to the extent that the original capital amount that they placed in the AMRF exceeded €63,500, the excess of that capital amount above €63,500 is immediately re-denominated as an ARF.

•  Vested Personal Retirement Savings Accounts (Vested-PRSAs) similarly changed, and on the passing of the Finance Act 2013 any restricted fund of €119,800 will reduce to €63,500, or to nil if the client has a guaranteed income of €12,700 per annum. (Note that the vested-PRSA restricted fund is now defined in legislation as the “ring-fenced amount”).

Vested-PRSAs taxation treatment on death

There is a proposed amendment to bring the inheritance tax treatment of a vested-PRSA in line with that of an ARF. This clarifies the situation where a vested-PRSA passes to a child over age 21. In such circumstances the value of the vested-PRSA will be subject to income tax at 30% and will be exempt from inheritance tax.

 



Every effort has been made to ensure that the information in this publication is accurate at the time of going to press. Irish Life Assurance plc accepts no responsibility for any liability incurred or loss suffered as a consequence of relying on any matter published in oromitted from this publication. Readers are recommended to take qualified advice before acting on any of the matters covered.