Finance Act 2013 – Implications for Pensions

Two important changes to pensions were passed into law in the Finance Act last week. Each are covered below.

1. Access to AVC’s

Members of occupational pension schemes can now access up to 30% of their Additional Voluntary Contributions pre-retirement. Tax at 41% will be deducted from such withdrawals.

This is a welcome route for members to access some cash pre-retirement, but of no use to Personal Pension holders, who cannot avail of this option.

Post retirement withdrawals are subject to income tax, PRSI & USC, so it may make sense to look at this option for clients who are close to retirement & who would be on the higher tax rate in retirement. Drawing down the 30% now avoids PRSI & USC.

2. AMRF Limit – Back to €63,500

The Approved Minimum Retirement Fund limit was increased to €119,800 a couple of years back, with an income test of €18,000 per year.

This has now been reduced back to the previous limit of €63,500, with an income test of €12,700 per year. Existing AMRF’s at the higher amount will now revert back to the lower limit, with the balance being designated to an Approved Retirement Fund.

This move will allow more access to post retirement funds, while also raising more revenue (ARF’s being subject to an annual taxable distribution for clients over 60).

Both moves are double edged – more access to your retirement funds, more money for the Taxman!

As ever, please contact us for further information.

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