How should ARFs be reformed

[Brendan Burgess]

Consultation on Supplementary Pensions Reform has three sections.

I attach the briefing and the questions to be addressed on Section C on the Reform of ARFs.

Submissions should be made by the 19th October.


C1. What, if any, limitations are appropriate for pension savers when drawing down benefits in retirement? Should the current suite of retirement savings drawdown options be changed in any way? For example, should savers be required to defer a portion of pension drawdown for a defined period?


C2. What, if any, changes need to be made to ARF access, and why?

C3. Given the narrowing gap between State pensions and the AMRF income threshold,what is an appropriate minimum level of required income where an AMRF would not be necessary and should this amount be indexed? What is an appropriate setaside amount and should it vary? If so how? Should the conversion age of 75 be adjusted?

C4. Are the current imputed distribution requirements appropriate? What changes, ifany, would be appropriate?

C5. To improve data capture and to facilitate the assessment of retirement outcomes,what additional returns should be required of Qualifying Fund Managers (QFMs)?

C6. Are current consumer protection arrangements in relation to ARFs effective? How
might consumer protection requirements be improved? Is there a role for maximum or standard charges?

C7. How can ARF owners be adequately informed and supported to make the decision that best suits their needs through retirement, especially given that ARFs require ongoing management? Is there a role for mandatory advice? How can access to good quality affordable advice be facilitated/provided for?


C8. How might in-scheme drawdown and group ARFs be facilitated? What additional requirements should be placed on schemes that want to provide in-schemed rawdown to ensure they have the capacity and capability to do so?

 

[Steven Barrett]

1. The AMRF requirement should be abolished. It is an absolute nonsense. And it disproportionately damages those with small pensions who are limited to taking out just 4% of a very small pension pot when they could be able to withdraw it all over a number of years in a tax efficient manner. Those with large pension pots are happy with the AMRF as it isn't subject to imputed distribution.
2. The mandatory withdrawals should be done away with. People should not be forced to withdraw money from their ARFs if they don't want or need the money. If you are prudent enough to save for retirement, you should be allowed to spend it as you wish.
3. The retirement rules for defined contribution company pensions should be changed to tax free lump sum of 25% fund value and annuity or ARF with the remainder. At present, if you take a lump sum based on final salary, you must purchase an annuity with the remainder or if you take 25% lump sum, you must invest in an ARF. This is confusing and really doesn't make any sense.
4. From my experience, ARF holders are pretty well protected. I know in the UK, when they introduced pension freedoms, they also brought out lots of warnings about pensioneers being conned out of their retirement funds. I have never come across that, CHC I suppose, but I haven't come across any fake funds or investments. And will more paperwork and brochures lead to more awareness or just swamp people with paperwork?
5. Make a seamless transition from pre retirement pensions to post retirement ARFs under the same policy. They all have the same funds, so why have to sell and start a new policy? Just take the lump sum out and carry on with the policy except you can now take money out of it...if you want because we're after doing away with imputed distribution.

But overall, a simplified structure to pensions and retirement would be great. But governments keep on adding legislation to the area and adding to all the confusion.


Steven
www.bluewaterfp.ie

 

[Gordon Gekko]

The 4/5/6% mandatory drawdown makes absolute sense, as prior to that wealthy ARF holders were using ARFs as tax-free money boxes. They got tax relief on the way in and no tax was being paid on the other side. However, there’s an argument for standardising it at (say) 4%.

The AMRF is a nonsense and should be abolished.

People should be able to take their retirement benefits from age 50 and remain in work.