Dáil Éireann - Volume 640 - 31 October, 2007

Written Answers. - Pension Provisions.

Deputy Terence Flanagan asked the Tánaiste and Minister for Finance if, in relation to the new pension regulations for the self employed, IT14, he will respond to a query by a person (details supplied) in Dublin 5; and if he will make a statement on the matter. [26099/07]

  Deputy Brian Cowen: I am advised by the Revenue Commissioners that the situation in relation to the individual who is the subject of the Deputy’s question is as follows:

Section 19, Finance Act 1999 introduced new options for certain individuals (including proprietary directors) who have contributed to pen[1255] sion funds and who have reached retirement age. These entitlements are set out in a Revenue leaflet IT 14 and may be summarised as follows: 25% of the pension fund may be taken as a tax free lump sum and the balance may be used to either purchase an annuity, invest in an Approved Retirement Fund (ARF) or withdrawn in cash subject to taxation at the individual’s marginal income tax rate. Before these options may be exercised, however, the individual concerned must be able to show that, having taken 25% of the fund as a tax- free lump sum, he/she has “specified income” of at least €12,700 per annum. Specified income is defined as a pension or annuity (including a Social Welfare pension) which is payable for the life of the individual and is being paid at the retirement date from which the benefits of the pension fund become payable. Where an individual does not have the required “specified income”, an amount of €63,500 or the full balance in the pension fund if less than this amount, must be transferred to an Approved Minimum Retirement Fund (AMRF). The capital in an AMRF is not available to an individual until he or she reaches 75 years though any income generated by the fund can be drawn down subject to tax. The purpose of an AMRF is to ensure a capital or income “safety net” for certain individuals throughout the period of their retirement.

As regards the “specified income” requirement, any pension or annuity payable to a spouse cannot be regarded as the specified income of the individual pension fund beneficiary, as it is not payable for the life of that individual but rather for the life of the spouse. In the specific case in question, the specified income requirement was not met. The individual seems to have taken the view that the full Social Welfare pension payable to a married couple should be reckoned as specified income whereas only the amount attributable to him personally may be reckoned.

I am informed by the Revenue Commissioners that they have no role in advising taxpayers in relation to the various pension products which may be available in the market place. Moreover, I am not in a position to comment on the information which may or may not have been provided to the individual when he established the AMRF.