PRB and new ARF option

S

seanob

Guest
Hi,

I hope someone can help me with this query.

Some years ago, my company DB scheme was wound up and I opted for a Personal Retirement Bond in which to invest my funds. I had hoped that, under the Finance Act 2011, I would be able to avail of the ARF option which is being extended from the previous, restricted eligibility category, to all DC scheme members. Although my company now operates a DC scheme, and although I could transfer the PRB fund into the DC scheme at any time, it seems that I will not be able to avail of the ARF option on retirement and will have to purchase an annuity from the PRB funds.

I am pretty sure that the above information is accurate but I wondered if anyone knows why this is the case? It seems strange that, having lost the certainty of the DB scheme and in effect being in the position of a DC scheme member, the flexibility of the ARF option is also to be denied.

Can anyone shed any light on this?

Thanks in advance.
 
A DB BOB which has a guaranteed annuity rate does not have ARF rights however all other BOB's have ARF rights regardless whether they are DB or DC. Whoever provided you with this information is incorrect. Our company queried this with Revenue at the time and they eventually came back and confirmed this was the case.
 
Baracuda,

Thanks for your reply. That sounds promising. I presume all this was fairly recent as the extension of ARF eligibility only came in the latest Finance Act? If so, would you have any details as to who in Revenue your company was dealing with?

Again, I appreciate your help.
 
It was a internal email from Revenue also I cannot give out internal Revenue phone numbers. If you contact the life office directly they will sort this out for you. If you are having problems PM me and I will point you in the right direction if the need arises.
 
OK, Baracuda, thanks. I suspect I will be coming back to you as the Life Insurance Co with whom I have the PRB have already told me that I won't be able to avail of the ARF option, as have the former DB scheme administrators, so I am keen to establish the specific Revenue position on this. I have asked both the Life Co and former scheme administrators for more detail and I will see what they come back with.
 
BOBs for employees arising from a DB scheme do not have the ARF option. From a Revenue letter: -

"Question 6: It is our understanding that the extension of the ARF option to members of a DC scheme also extends to individuals with Buy Out Bonds, this is also true where the Buy Out Bond was established as a result of a transfer from a Defined Benefit arrangement

Answer 6: Your understanding is incorrect. The ARF option is available to Buy Out Bond holders only where they could avail of the ARF option under the terms of their original scheme rules. It is not available where the original scheme was Defined Benefit or where the original DC scheme's Rules are not amended to provide the option."
 
Thanks DV. This seems at odds with what Baracuda has said but you seem to be quoting from an external Revenue communication, as opposed to an internal Revenue email.

Has Revenue been challenged on this stance, do you know? I did not leave a DB voluntarily. Rather, I had no choice in that my DB scheme was wound up against the wishes of the members and the buy out bond leaves me in no better position than anyone with a DC scheme fund. So, it seems a somewhat arbitrary discrimination on Revenue's part.
 
It may have been challenged. I'm not aware of any such challenge but unless Revenue or the challenger made it public, that doesn't imply much.

You do have a very reasonable argument. Why don't you write to Revenue yourself to make this argument, or if you prefer get a broker to do it on your behalf?
 
DV - I will raise the issue with Revenue myself and ask them for a decision in my particular case. Is there a specific section in Revenue that deals with issues such as this - e.g. the originators of the letter you quoted - or should I raise it with my local Inspector?
 
Retirement Benefits District, Large Cases Division, Ph. (01) 6470710. I'd be grateful if you could post your outcome back here.
 
Revenue issued an eBrief on this topic yesterday [broken link removed]

The following summarises the position in relation to the ARF option on the transfer of main occupational pension scheme benefits to BOBs:

Defined Benefit Schemes: The ARF option is available in respect of transfer values from defined benefit occupational schemes to a BOB where the scheme member has the right to exercise the option under the scheme rules prior to the date of transfer i.e. he or she meets the proprietary director test before the date of transfer.

Any other main scheme transfers to a BOB from a DB scheme do not attract the ARF option.

Defined Contribution Schemes: The ARF option is available in respect of transfer values from defined contribution occupational schemes:

where the scheme member meets the proprietary director test before the date of transfer, and

in any other case, where the transfer takes place on or after 6 February 2011 and the scheme rules have been amended to provide for the option before the date of transfer.

Main scheme transfers to BOBs from DC schemes before 6 February (other than in the case of proprietary directors) do not attract the ARF option.
Click to expand...
 
[broken link removed]



Notwithstanding this, it appears to be the case that certain providers in the market are extending the ARF option to all BOBs:
  • whether the originating scheme is DB or DC,
  • irrespective of when the scheme member left service (before or after 6 February 2011), and
  • whether or not the scheme rules had been amended to allow the ARF option at the member's date of leaving service.
Click to expand...
Looks like the door has been firmly closed on ARF options for pre finance act 2011 BOB holders...pity! Yet another pit fall in the pension's industry for consumers where some people have ARF rights and others don't. I would hope that the Pensions Board would high light this issue to the government but then again I won't be holding my breath for that to happen!
 
At the minute Standard Life are offering the AMRF/ARF options for PRB's that originated from a Defined Benefit Scheme.
 
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