by Patrick O’Connor, Senior Associate, Employment Law and Benefits department, Mason Hayes & Curran
The Finance Bill 2021 (Bill) provides for a number of anticipated pensions related changes. The amendments will implement some of the recommendations of the Interdepartmental Pensions Reform and Taxation Group (Group).
End of the Approved Minimum Retirement Fund
The Bill removes the Approved Minimum Retirement Fund (AMRF) requirement for individuals availing of the Approved Retirement Fund (ARF) option on retirement. It also allows for the transfer of funds in an AMRF to an ARF for those who presently hold an ARF. Until now, a retiree that had not reached the age of 75 had to demonstrate a guaranteed income of €12,700 per annum if they wished to transfer all of their retirement benefits to an ARF. If they were not in receipt of the necessary income, they were required to transfer €63,500 to an AMRF or purchase an annuity to increase their guaranteed income to the required level.
Death in service
The Bill permits the selection of the ARF option for death-in-service pensions as an alternative to the compulsory purchase of annuities. This will allow the dependants of a deceased scheme member to invest in an ARF instead of being required to purchase a small annuity after the death-in-service lump sum has been paid.
Once the Bill is passed into law, those with more than 15 years’ service in an occupational pension scheme will be permitted to transfer their retirement benefits to a Personal Retirement Savings Accounts (PRSA). The removal of this historical restriction allows for greater choice for those leaving service or changing employer.
Employer contributions and corporate transactions
The Bill includes a technical amendment on the tax relief of pension contributions made by an employer to a scheme set up for employees of another company. This will be applicable in certain circumstances such as company re-organisations, joint ventures, or other group arrangements.
The pension amendments provided in the Bill indicate that we may see the adoption of other recommendations made by the Group in the future. This might include the replacement of the ARF with a whole-of-life PRSA and the phasing out of the Retirement Annuity Contract and the Buy Out Bond. Of all the pension changes brought about by the Bill, the creation of an ARF option for the dependants of a member that dies in service will be particularly well received.
About the author
Patrick is a Senior Associate on the Pensions team with Mason Hayes & Curran Employment Law and Benefits department. He joined Mason Hayes & Curran in 2019 having previously worked for four years, as an in-house solicitor with a large pension provider and professional trustee company.
Patrick advises trustees, pension providers and employers on all aspects of pension law. He has extensive experience in all areas of pension law including the drafting and amendment of scheme documentation, the interpretation of pensions legislation and Revenue compliance. Patrick has experience in trust law, managing complaints to the Financial Services and Pensions Ombudsman and pension investment structuring. Patrick also has particular expertise in advising on single member pension arrangements.