Finance Bill - Interesting Pensions Changes

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Gordon Gekko

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I note the following in the Finance Bill:

- The Approved Minimum Retirement Fund (AMRF) is being abolished

- The ‘15 year rule’ in relation to PRSA transfers is being abolished

- The Approved Retirement Fund (ARF) option is being made available for ‘death in service’ scenarios in relation to company pension schemes, thus enabling the bereaved to avoid unwanted annuities with the excess in a ‘four times salary’ calculation

They’re all sensible moves in my view.
 
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Steven Barrett

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The Finance Bill was published last night and as promised, the AMRF is being done away with. From when the Finance Bill becomes law, there will be no requirement to set up an AMRF and from 1 January 2022, all AMRFs will become ARFs. This is great news, especially for those who have small pensions pots and for those in ill health, who previously had to get Revenue approval to get out of the AMRF.

The Finance Bill is also making the ARF available for funds over 4 times salary in death in service benefits. Previously you had to purchase an annuity.

Lastly, the 15 year rule is removed on transferring benefits from an occupational pension scheme to a PRSA. Previously, if you were in a scheme for 15 years, you couldn't move the benefits to a PRSA, you will be now. A cert of benefits comparison will still be required.

Steven
www.bluewaterfp.ie
 

Jim Stafford

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That is bad news for people going bankrupt. In a bankruptcy, AMRF's were generally protected. ARF's can be attacked in a bankruptcy.

Jim Stafford
 

Steven Barrett

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That is bad news for people going bankrupt. In a bankruptcy, AMRF's were generally protected. ARF's can be attacked in a bankruptcy.

Jim Stafford
The benefits outweigh the downside. Lots of people have contacted me over the years with pension pots of less than €63,500, who despite having tens of thousands in their AMRF, were only able to access 4% a year. And then there was the sick, who know they wouldn't see 75. Unless they were terminally ill or satisfied the AMRF requirements through the State pension, they could only access 4% of their own money each year.

It also makes my job easier. The looks I used to get from people when trying to explain these stupid rules.

Steven
www.bluewaterfp.ie
 

Gordon Gekko

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Interesting point, Jim.

Is that explicit because previously, other than the 4%, the capital couldn’t be accessed until age 75 or €12,700 of guaranteed income was obtained? Or is it derived from the relevant case law on the basis that BM may not have had an AMRF so it was never considered?

Many thanks.
 

Steven Barrett

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I'd say we're definitely getting lifetime PRSAs down the road and the current ARF products will be withdrawn.

Gerard

www.prsa.ie
I agree but unless there is drastic changes made to the charging structure of PRSAs, it is going to be bad news for consumers. The charges under PRSAs are much more expensive than ARFs, personal pensions and executive pensions.

Expect furious lobbying by Brokers Ireland about how unfair this is for brokers who will no longer be able to receive 4% commission on the €1m ARFs :rolleyes:
 

SGWidow

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For transfers from an occupational pension scheme to a PRSA, does anyone know the price range for certificates of comparison?
 

GSheehy

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Can I ask - what is a lifetime prsa?

Currently you have to move your pension fund from a pre-retirement product (eg PRSA) to a post-retirement product (eg. ARF).

Lifetime would mean that you could technically hold the PRSA from inception to death ie. the PRSA could be converted from pre to post within the one product.

Gerard

ww.prsa.ie
 

Steven Barrett

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Can I ask - what is a lifetime prsa?
Be aware that the don't exist at present. If you have your money in a vest PRSA and don't transfer it to an ARF before the age of 75, it is locked in the fund without access until you die.

The lifetime PRSA is a recommendation and most probably something that will happen in the next few years. The Pensions Authority are looking for more power and PRSAs fall under their remit, so they will be happy with that. And remember that life companies have to give the PA a cut of the management fee, so there will always be that additional charge passed onto the consumer.


Steven
www.bluewaterfp.ie
 

Dave Vanian

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"The AMRF requirement will no longer apply to individuals availing of the ARF option from occupational pension schemes, retirement annuities and personal retirement savings accounts with effect from the passing of this Act."

When will the act be passed?
 

Conan

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"The AMRF requirement will no longer apply to individuals availing of the ARF option from occupational pension schemes, retirement annuities and personal retirement savings accounts with effect from the passing of this Act."

When will the act be passed?
The Act must be passed before the year end. So probably late Nov or early December.
 

Smoneen

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The Finance Act is generally signed into law on 25th of December. The time lines for moving through the Oireachtas are on the explanatory notes attaching to the bill
 

ginslia

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Great news re AMRF, I thought it penalised those who had made modest private pension provisions v those who did not, or had very large guaranteed pensions.

Am I missing something? Did they achieve their objective for some retirees?
 

Gordon Gekko

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It probably increases the tax take in that the 4% mandatory distribution extends to the monies in the now defunct ARF.

And it helps people whose only money is in their ARF but who can’t access it.
 

Shirazman

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The Finance Act is generally signed into law on 25th of December. The time lines for moving through the Oireachtas are on the explanatory notes attaching to the bill

Decent of Michael Dee to give up a few minutes of his Christmas Day to sign the Act. I hope he doesn't spill some claret on it!
 
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