Dáil Éireann - Volume 628 - 22 November, 2006

Written Answers. - Pension Provisions.

Mr. Timmins asked the Minister for Finance if he sees merit in modifying the requirement in approved pension schemes of taking out an annuity in view of the poor value in such annuities. [39137/06]

  Mr. Cowen: The position is that prior to the passing of the Finance Act, 1999, any person going on pension under a [198] defined contribution scheme or a retirement annuity contract was required to purchase an annuity with any remaining pension fund moneys, following the drawdown of the appropriate tax-free lump sum.

The Finance Act, 1999 introduced changes which gave a significant degree of flexibility and personal choice to certain categories of individual in relation to the drawing down of benefits from their pension plans. These choices include the options to purchase an annuity, receive the balance of the fund in cash (subject to tax, as appropriate) or to invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF), depending on the circumstances. Proprietary directors, self-employed individuals and certain employees/directors in non-pensionable employment represent the categories of individual who can exercise these options in relation to their pension plans.

While these flexible options for drawing down pension benefits are not available to members of employers’ defined contribution schemes (who are outside of the categories of individual described above) in respect of benefits derived from standard contributions to the schemes, the flexible options do apply as regards any Additional Voluntary Contributions (AVCs) made by such members either to their main schemes or to separate AVC schemes. The flexible options also apply to Personal Retirement Savings Accounts (PRSAs) introduced in the Finance Act, 2002 to create an alternative pension product which is flexible, portable and user-friendly.

The question of making changes, as suggested by the Deputy, to the existing arrangements for the broad membership of approved occupational pension schemes, generally, is a complex matter and needs to be considered as part of the wider issue of pension and retirement provision in Ireland. In this regard, the Government is committed to the publication next year of a Green Paper on Pensions Policy. The Green Paper, into which my Department (among others) will have an input, will outline the major policy choices and challenges facing us in the pensions area and important issues such as those raised in the question are best left for consideration in that context.