B
AFAIK you will not be double taxed. The amount of tax already deducted on the "deemed encashment" will be taken into account when you do encash some of the funds.
As long as the person encashes the appropriate percentage (1%, 2%, 3% etc...) they would not be taxed other than the normal tax that would apply to an encashment anyway.No, you do not receive any credit for the income tax and PRSI deducted on the imputed distribution.
As long as the person encashes the appropriate percentage (1%, 2%, 3% etc...) they would not be taxed other than the normal tax that would apply to an encashment anyway.
If the 1%, 2%, 3% does not take them over their tax-free threshold they would still not pay tax (even if they did not make any encashment).
I would not think that most pensioners have income in excess of €35K a year
This is not true.
- It clearly makes sense to extract the full 1%, 2% 3% , pay the tax and retain the balance personally. If one simply pays the tax on the deemed distrubution -but leaves the balance of the 1%, 2% or 3% in the ARF- then this will be taxed again on eventaul withdrawal. A no-brainer.
Most people do not get a pension of 2/3rds of salary - so my argument that a lot of pensions would be less than €30K is most definitely true.
- Access to ARFs (in the main) is open only to Self-employed and Company Directors (who own more than 5% of the share capital). The average industrial wage (I would suggest) is certainly not a reasonable proxy for the earnings of this group. In my experience, those who do effect ARFs do so because they have other income, do not require the certainty of buying an annuity and require the flexibility of income drawdown that ARFs offer. Because they have other income they can "afford" to take the inverstment risk inherint in the ARF structure.
Yes but not likely to be 2/3rds
- The only other category that can invest in an ARF are those who have funds coming from AVC investments. By the very nature of AVCs, it means that they must also be members of an occupational pension plan which will in itself pay a pension. In my experience, those who invest in AVCs tend to be more highly paid than the average industrial wage and therfore their basic occupational pension is likely to be higher than the average.
Most of the people buying ARFs are not industrial workers, and so earn more than the GAIE.
Average income per head is about 36k. Note that is per person.
Average income per worker would be higher.
...the basic point is that telling someone to encash because they will be hit by tax without assessing their personal situation would be very very poor advice...
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