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.
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