The Bill provides an individual with the option to make a once off early withdrawal of up to 30% of their AVC funds. There is a 3 year time limit to do, commencing on the date of passing of Finance Act 2013.
This option is available in respect of AVC’s made for the purposes of providing benefits in retirement, and does not extend to AVC’s made for the purposes of purchasing notional service, nor does it extend to withdrawals from other pension products. Where the AVC is subject to a pension adjustment order, then the scheme member and their spouse/former spouse/civil partner/former civil partner may exercise the option independently in respect of their respective share of the fund.
Where the individual exercises the option, the amount paid by the administrator will be subject to PAYE (but not USC, nor is it intended to be subject to PRSI) at 41%, unless a certificate of tax credits has been provided to the administrator.
The other change in this area sees a temporary rescission of provisions brought in by Finance Act 2011. The provisions being temporarily rescinded relate to:
(a) the increase in the minimum guaranteed pension income for life (specified income) from €12,700 per annum to 1.5 times the State Pension (Contributory) i.e. currently €18,000, which applies to
individuals aged under 75 years in order for such individuals to have access to an Approved Retirement Fund (ARF), and
(b) the increase in the maximum ‘‘set aside’’ amount required to be placed in an Approved Minimum Retirement Fund (AMRF) from €63,500 to 10 times the rate of State Pension (Contributory) i.e. currently €119,800, where individuals do not meet the specified income requirement and choose not to purchase an annuity.
The previous limits of €12,700 and €63,500 are being reinstated in respect of ARF options exercised on or after the date of the passing of Finance Act 2013. The intention is that the lower limits will apply for a period of 3 years, whereupon the higher limits implemented in 2011 will be reapplied by Finance Act 2016. To ensure that individuals who were affected by the higher limits in the period since the passing of Finance Act 2011 (i.e. since 6 February 2011) are not disadvantaged, provision is also made that:
Contact OSK tax advisors for more information.
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