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Written Answers - Pension Provisions

Tuesday, 27 March 2012

Dáil Éireann Debate
Vol. 760 No. 3

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 134.  Deputy Mary Mitchell O’Connor Information on Olivia Mitchell Zoom on Olivia Mitchell  asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan  if he is investigating recent assertions that companies are offering early draw down of pension savings (details supplied); and if he will make a statement on the matter. [16507/12]

 135.  Deputy Mary Mitchell O’Connor Information on Olivia Mitchell Zoom on Olivia Mitchell  asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan  if Ireland is losing tax revenue due to the early draw down of pensions referred to in a publication (details supplied); and if he will make a statement on the matter. [16508/12]

 136.  Deputy Mary Mitchell O’Connor Information on Olivia Mitchell Zoom on Olivia Mitchell  asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan  if, in view of the fact that companies are offering early draw down of pension funds that he will reconsider legislating for the early draw down of AVCs and personal pension schemes as previously requested; and if he will make a statement on the matter. [16509/12]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I propose to take Questions Nos. 134 to 136, inclusive, together.

The transfer of an occupational pension scheme member’s pension fund benefits or a Personal Retirement Savings Account (PRSA) contributor’s PRSA assets to an overseas pension arrangement is permitted, subject to the transfer complying with the Department of Social Protection’s “Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003” and Revenue rules. Under the Regulations, in the case of occupational pension schemes, the facility to transfer only applies to a scheme member who is entitled under the Pensions Act 1990 to “preserved benefits” under the scheme — in other words to a scheme member whose service in the relevant employment has terminated.

It is the responsibility of all trustees to ensure full compliance with the requirements of the Regulations. In essence, the Regulations require that, prior to making any overseas transfer payments, the trustees and PRSA providers must be satisfied that:

(a) The member has requested a transfer.

(b) The overseas arrangement provides relevant benefits as defined by section 770 of the Taxes Consolidation Act 1997.

(c) The overseas arrangement has been approved by the appropriate regulatory authority in the country concerned.

In practice, trustees and PRSA providers are required to obtain written confirmation to that effect from the trustees, custodians, managers or administrators of the overseas arrangement to which the transfer is to be made.

I am advised by the Revenue Commissioners that if the transfer is to another EU Member State, Revenue rules require the overseas scheme to be operated or managed by an Institution for Occupational Retirement Provision (IORPS), within the meaning of the EU Pensions Directive (known as the “IORPS Directive”), and to be established in a Member State of the [750]European Communities which has implemented the IORPS Directive in its national law. The scheme administrator must also be resident in an EU Member State. In broad terms, the purpose of the IORPS Directive is to ensure that members and beneficiaries of occupational pension schemes are properly informed about the rules and financial position of the scheme and their rights under the scheme and to ensure the efficient management and investment of scheme assets.

If the transfer is to a country outside the EU, under Revenue rules a transfer may not be made to a country other than the one in which the member is currently employed

I am also advised by the Revenue Commissioners that in late 2009, they introduced an additional approval condition for all existing and new retirement benefit schemes and PRSAs to the effect that all overseas transfers under the provisions of the above mentioned Regulations may be made to facilitate bona fide transfers only, that is that they are not made with the primary purpose of circumventing Irish tax requirements. Moving pension funds abroad in an effort to frustrate Irish tax rules would fall foul of that approval condition and could ultimately result in approval being withdrawn which would have very significant consequences for any individual concerned.

Tax relief given on pension savings is intended to encourage individuals to save for the long-term with a view to providing them with an income in retirement. That is why our tax rules, like those in many other jurisdictions, set a minimum age from which benefits from pension savings can normally be accessed. It is important that these rules are not abused and that savings built up with the benefit of generous tax reliefs are not misused.

Issues relating to an apparent increase in requests for transfers of Irish pension funds abroad, following newspaper advertisements encouraging such actions in order to access tax-free cash early, have been brought to the attention of my Department and the Revenue Commissioners as well as, I understand, to other relevant bodies. My Department has, in conjunction with the Revenue Commissioners, set in train an examination of the issues involved in order to ensure that any transfers of Irish pension funds overseas are for bona fide purposes and in compliance with the requirements and intentions of the existing rules and regulations.

I am not in a position at this point to comment on the tax revenue implications, if any, of the issues raised in connection with the apparent increase in transfer payment requests.

The question of pre-retirement access to Additional Voluntary Contributions (AVCs) and personal pension plans is a separate matter and I have recently set out my position in this regard to the Deputy and to other public representatives.


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