# Finance Bill - Interesting Pensions Changes



## Gordon Gekko (22 Oct 2021)

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 (22 Oct 2021)

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


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## Jim Stafford (22 Oct 2021)

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


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## Steven Barrett (22 Oct 2021)

Jim Stafford said:


> 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


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## Gordon Gekko (22 Oct 2021)

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.


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## GSheehy (22 Oct 2021)

I'd say we're definitely getting lifetime PRSAs down the road and the current ARF products will be withdrawn.

Gerard

www.prsa.ie


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## Steven Barrett (22 Oct 2021)

GSheehy said:


> 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


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## Ndiddy (22 Oct 2021)

can someone do a key post on PRSA vs ARFs?


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## SGWidow (22 Oct 2021)

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


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## ArthurMcB (22 Oct 2021)

Can I ask - what is a lifetime prsa?


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## kevhenry (22 Oct 2021)

SGWidow said:


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


There are only two companies I know of who do them and both charge €1,000+VAT

Kevin
www.thepensionstore.ie


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## GSheehy (22 Oct 2021)

ArthurMcB said:


> 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


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## Steven Barrett (22 Oct 2021)

ArthurMcB said:


> 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


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## Dave Vanian (22 Oct 2021)

_*"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?


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## Conan (22 Oct 2021)

Dave Vanian said:


> _*"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.


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## Steven Barrett (22 Oct 2021)

Word is late December. After that the AMRF is not a requirement for new retirees. Current AMRF's will become ARFs on 1 January 2022


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## Smoneen (22 Oct 2021)

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


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## ginslia (26 Oct 2021)

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?


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## Gordon Gekko (26 Oct 2021)

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.


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## Shirazman (26 Oct 2021)

Smoneen said:


> 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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## Gordon Gekko (26 Oct 2021)

Shirazman said:


> 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!


Shiraz actually goes quite well with turkey…


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## mtk (28 Oct 2021)

yes this AMRF originally was designed to save pensioners from themselves i.e. buying that porsche ! and running out of cash.
In fact as i understand it a far more common phenomenon is pensioners excessively(?) limiting withdrawals for fear of running out .
Makes sense to get rid of it.


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## Dave Vanian (29 Oct 2021)

mtk said:


> yes this AMRF originally was designed to save pensioners from themselves i.e. buying that porsche ! and running out of cash.
> In fact as i understand it a far more common phenomenon is pensioners excessively(?) limiting withdrawals for fear of running out .
> Makes sense to get rid of it.



That thinking always baffled me.  "You've saved up a pension fund prudently for perhaps 40 years.  You've managed your finances for maybe 45 years.  But apparently now you're liable to lose the run of yourself and blow it all..."  

Definitely a sensible decision at last.


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## Conan (29 Oct 2021)

When Charlie McCreevy introduced AMRFs he said that they were designed to prevent DC pensioners spending it all (from the ARF) immediately.  But €63,800 was more of a nuisance than of any real benefit.  Well rid of.


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## Steven Barrett (29 Oct 2021)

That was as a result of lobbying from fund managers who feared that retirees would take their money out of their grasp and they would lose out. 

Trying to explain the concept of the AMRF was always a difficult one so I'm delighted it's gone. It makes my job easier.


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## phoenix53 (29 Oct 2021)

"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"

Hi.  Could someone explain what this means please?  Does it refer to defined benefit schemes if you die when in service?


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## Baby boomer (29 Oct 2021)

With the 15 year rule gone, it is now possible to take a transfer value from a deferred occupational pension into a  PRSA.  If one were to do that (leaving aside the question as to whether it's a good idea or not) is 60 the earliest age at which the PRSA can start to be drawn down?


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## Hilda2021 (29 Oct 2021)

Will this have any effect on accessing your pension early from 50 onwards, has anything changed for that please?


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## Dave Vanian (29 Oct 2021)

phoenix53 said:


> "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"
> 
> Hi.  Could someone explain what this means please?  Does it refer to defined benefit schemes if you die when in service?



In brief, maximum lump sum a pension scheme member's estate can receive in the event of death in service is 4 years' salary.  Up to now, any excess would have to be used to buy an annuity for the spouse or dependent.  Now any excess over 4 x salary can be invested in an ARF.


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## Dave Vanian (29 Oct 2021)

Baby boomer said:


> With the 15 year rule gone, it is now possible to take a transfer value from a deferred occupational pension into a  PRSA.  If one were to do that (leaving aside the question as to whether it's a good idea or not) is 60 the earliest age at which the PRSA can start to be drawn down?



No it's 50 assuming that the person is no longer in the employment.


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## Dave Vanian (29 Oct 2021)

Hilda2021 said:


> Will this have any effect on accessing your pension early from 50 onwards, has anything changed for that please?



No change to the age rules, but whatever age you retire, you can take a lump sum and reinvest the balance into an ARF without the need for an AMRF.


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## Hilda2021 (29 Oct 2021)

Dave Vanian said:


> No change to the age rules, but whatever age you retire, you can take a lump sum and reinvest the balance into an ARF without the need for an AMRF.


Thank you Dave, great news


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## Steven Barrett (29 Oct 2021)

Baby boomer said:


> With the 15 year rule gone, it is now possible to take a transfer value from a deferred occupational pension into a  PRSA.  If one were to do that (leaving aside the question as to whether it's a good idea or not) *is 60 the earliest age at which the PRSA can start to be drawn down?*


You have to be aware that PRSA's largely follow the rules of occupational and person pensions. 

If you have a transfer value from an occupational pension or were in an employer provided PRSA (even if your employer didn't contribute), you can access the value of the PRSA from age 50. 

But, if your PRSA is from non pensionable income or you went off and set up your own PRSA outside the one offered from your employer (this does not include PRSA AVC's which are linked to your occupational pension scheme), you have to wait to age 60 to access the fund. 

I know PRSAs were marketed as the pension you can bring with you from job to job but it's certainly not a 1,000 songs in your pocket. 

Steven
www.bluewaterfp.ie


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## Dave Vanian (29 Oct 2021)

Steven Barrett said:


> If you have a transfer value from an occupational pension or were in an employer provided PRSA (even if your employer didn't contribute), you can access the value of the PRSA from age 50.



I see a few new twists - apparently early retirement from a PRSA re PAYE employment doesn't require you to completely sever all ties with the employer; just cease the employment.  I can see that appealing to company directors in certain circumstances.  

The removal of the 15 year rule on transfers from Occupational Schemes will probably make PRSAs more attractive for self-administered arrangements post-IORPS but the lower limits on contributions might weigh against that.


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## Steven Barrett (30 Oct 2021)

Dave Vanian said:


> I see a few new twists - apparently early retirement from a PRSA re PAYE employment doesn't require you to completely sever all ties with the employer; just cease the employment.  I can see that appealing to company directors in certain circumstances.
> 
> The removal of the 15 year rule on transfers from Occupational Schemes will probably make PRSAs more attractive for self-administered arrangements post-IORPS but the lower limits on contributions might weigh against that.


The Bob is going to be done away with soon enough so they had to remove the 15 year rule for PRSAs. But they haven't removed the cert of comparison, so it'll cost you €1,200 to transfer from an occupational pension to a PRSA. Using PRSA's as the main pension for those not in occupational pensions is only going to result in higher charges for policyholders. 


Steven
www.bluewaterfp.ie


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## Oisin19 (30 Oct 2021)

the vast majority of self administered funds don't need a cert to transfer to a PRSA


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## phoenix53 (31 Oct 2021)

Dave Vanian said:


> In brief, maximum lump sum a pension scheme member's estate can receive in the event of death in service is 4 years' salary.  Up to now, any excess would have to be used to buy an annuity for the spouse or dependent.  Now any excess over 4 x salary can be invested in an ARF.


Thank you.


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## Jim Stafford (1 Nov 2021)

Gordon Gekko said:


> s 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?



I have never had to tease out with the Official Assignee the reasons why he does not attack the AMRF. He might want to just avoid a court challenge that the Debtor could successfully argue that the OAP would not be sufficient to pay Reasonable Living Expenses at the age of 75.

Jim Stafford


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## Steven Barrett (1 Nov 2021)

Oisin19 said:


> the vast majority of self administered funds don't need a cert to transfer to a PRSA


Because they tend to be one person schemes that can be wound up to avoid the need for the cert.


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## Brendan Burgess (2 Nov 2021)

I haven't followed this aspect of the Budget, but I presume that this is the same issue.









						Changes in Finance Bill may mean rise in retirees’ tax bill of €1,300 a year
					

Move will offer greater flexibility to some pensioners – but others will pay more tax




					www.irishtimes.com


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## Ndiddy (2 Nov 2021)

Brendan Burgess said:


> I haven't followed this aspect of the Budget, but I presume that this is the same issue.
> 
> 
> 
> ...


can someone give a summary of the link as can't access


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## Steven Barrett (2 Nov 2021)

Ndiddy said:


> can someone give a summary of the link as can't access


It's a tabloid headline.

If you have €63,500 in an AMRF, which becomes an ARF from next year, you have to take out 4% = €2,540. If paying tax at the higher rate, you will pay an additional €1,300 in tax from your AMRF income.


I've been looking after retired people for as long as the AMRF has been around. When the State pension went over €12,700, AMRF's became ARFs and not one client complained about having to pay tax on the 4%. 

Those who were happy to use the AMRF as a means of accumulating their retirement income without paying tax, have enough money for €1,300 in extra tax not to be an issue. Those with small pension pots, aren't paying tax at the higher rate and would prefer to be able to access their money and pay tax on it. 

Steven
www.bluewaterfp.ie


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## RetirementPlan (2 Nov 2021)

Steven Barrett said:


> It's a tabloid headline.
> 
> If you have €63,500 in an AMRF, which becomes an ARF from next year, you have to take out 4% = €2,540. If paying tax at the higher rate, you will pay an additional €1,300 in tax from your AMRF income.
> 
> ...


Thanks, I struggled to see the connection between the article and the headline at all.


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## bstop (3 Nov 2021)

The abolition of the AMRF is bad news to lots of people. Consider an early retiree with a large ARF and who will not achieve a state pension above 12500 euro per year, as an increasing number of future retiree's will not. These people will be forced to withdraw extra large amounts from their ARFs and many of these will be forced into the higher tax rate. Somebody retiring at age 60 would have 15 years of withdrawals from their ARF and if they opted for a low risk strategy their ARF will be seriously depleted at age 75. Under the existing system these people were able to opt for a high risk strategy for their AMRF and have the safety net of maybe 100000 euro at age 75 to replenish their depleted ARF. Many of these pensioners will be in danger of poverty at age 75 as a result of this change and some of these will become dependant of the state.
The abolition of the AMRF is purely a tax grab by the government to gain access to a large pot of money immediately, to improve the short term state finances at the future expense of pensioners. 
The Irish Times article is aptly headlined and is not a tabloid headline as suggested.


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## Shirazman (3 Nov 2021)

bstop said:


> Consider an early retiree with a large ARF and who will not achieve a state pension above 12500 euro per year, as an increasing number of future retirees will not.
> These people will be forced to withdraw extra large amounts from their ARFs and many of these will be forced into the higher tax rate.



Not clear what has changed here; how does the abolition of the AMRF create a new requirement to withdraw _*extra large*_ amounts from their ARF ?



bstop said:


> Somebody retiring at age 60 would have 15 years of withdrawals from their ARF and if they opted for a low risk strategy their ARF will be seriously depleted at age 75. Under the existing system these people were able to opt for *a high risk strategy for their AMRF and have the safety net of maybe 100000 euro at age 75 to replenish their depleted ARF.* Many of these pensioners will be in danger of poverty at age 75 as a result of this change and some of these will become dependant of the state.



The underlying assumption there being, presumably, that the high risk strategy for the AMRF would always have guaranteed them more funds at age 75!   But what if it didn't?   Surely they would have become dependent on the State?   So what has changed there?


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## bstop (3 Nov 2021)

The change is simply that at present there is a choice as to whether 4% withdrawals are made from the 63500 euro in the AMRF. The change is that in future 4% withdrawals must be made from this 63500 euro which will be transferred to an ARF.
There is less flexibility under the new rules which will be detrimental to many pensioners in later life..
Some pensioners are always going to become dependant on the state. What I have pointed out is that under these new rules greater numbers of pensioners will eventually become state dependant.


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## Steven Barrett (3 Nov 2021)

bstop said:


> The abolition of the AMRF is bad news to lots of people. Consider an early retiree with a large ARF and who will not achieve a state pension above 12500 euro per year, as an increasing number of future retiree's will not. These people will be forced to withdraw extra large amounts from their ARFs and many of these will be forced into the higher tax rate. Somebody retiring at age 60 would have 15 years of withdrawals from their ARF and if they opted for a low risk strategy their ARF will be seriously depleted at age 75. *Under the existing system these people were able to opt for a high risk strategy for their AMRF and have the safety net of maybe 100000 euro at age 75 to replenish their depleted ARF. Many of these pensioners will be in danger of poverty at age 75 as a result of this change and some of these will become dependant of the state.*
> The abolition of the AMRF is purely a tax grab by the government to gain access to a large pot of money immediately, to improve the short term state finances at the future expense of pensioners.
> The Irish Times article is aptly headlined and is not a tabloid headline as suggested.



That is not correct. As well as working with retirees since the introduction of the ARF & AMRF, I also spoke to the Revenue about the abolition of the AMRF. It is not fit for purpose. It is simply not true that people need money put away from themselves for when they are 75. People who have retirement pots are quite prudent with the money they take out with most only taking out the minimum required, even when they could take out more. 

If you have a large pension pot, €1,300 a year in extra tax is not going to be a burden. 

But if you have a small pension pot, being able to access the small amount of money you have saved can make a big difference. 

Maintaining the AMRF suited those who did not need the money and were happy for it to accumulate tax free without the Revenue requiring imputed distribution. But even still, the State pension meant that a lot of these people meet the guaranteed income requirement at 66 anyway and not age 75. So given it wasn't actually saving people from themselves and that the age 75 was reduced to 66 for most, what was the purpose of the AMRF? 

In a year of record tax takes for the government, trying to get increased taxes into the State coffers isn't the reason. If they were looking for tax income, they would have done it when the IMF were bailing us out!


Steven
www.bluewaterfp.ie


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## bstop (3 Nov 2021)

It is correct to state that it is bad news for some pensioners as I have pointed out.  There has always been the provision that allowed a 4% yearly withdrawal from AMRFs for people with small pension pots. The new rules have closed down the possibility for certain people who have no chance of achieving the full state pension to maintain a financial safety net for later life. 
Have you forgotten that the government did take extra taxes during the IMF bailout from PRSAs. The extra tax take from the abolishment of AMRFs will not add to this year's record tax takings but to future years when Corporation tax take might reduce. This is what the government are looking at.


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## Steven Barrett (3 Nov 2021)

bstop said:


> It is correct to state that it is bad news for some pensioners as I have pointed out.  There has always been the provision that allowed a 4% yearly withdrawal from AMRFs for people with small pension pots. The new rules have closed down the possibility for certain people who have no chance of achieving the full state pension to *maintain a financial safety net for later life.*
> Have you forgotten that the government did take extra taxes during the IMF bailout from PRSAs. The extra tax take from the abolishment of AMRFs will not add to this year's record tax takings but to future years when Corporation tax take might reduce. This is what the government are looking at.


If you have €50k in an AMRF, you can take out €2,000 a year as a once off lump sum. There's no going back for a 2nd payment in the same year. What if you are 70 years of age and can't afford to heat your house or fix your car? But you have €50,000 in a pension that you can't touch? What good is getting that money at 75 when you are broke now? What do they think they will tell you when you say "but you'll have all this money when you are 75"? I'm afraid Brendan's firewalls won't allow me to print what the answer would be!


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## Dave Vanian (3 Nov 2021)

bstop said:


> There has always been the provision that allowed a 4% yearly withdrawal from AMRFs for people with small pension pots.



Not always.  That facility only became available with effect from 1/1/2015.  Prior to that one could only withdraw growth on an AMRF, which could be zero in some years.  



bstop said:


> The extra tax take from the abolishment of AMRFs will not add to this year's record tax takings but to future years when Corporation tax take might reduce. This is what the government are looking at.



This extra tax take from the abolition of AMRFs will be negligible in size in the context of the country's finances.  


Many people had no need for AMRFs because they had annuities and/or defined benefit pensions from other employments.  
People with smaller funds may well be exempt from tax in retirement altogether, especially if they don't qualify for a full State Pension which is a group you're speaking of.  €36,000 annual income for a married couple can be exempt from tax at age 65, which would require a large pension fund.  
Another cohort of people who availed of AMRFs were early retirees.  They will be stuck paying the additional €1,300 tax per year until they reach 66 and get the State Pension.  People who can afford to retire early are rarely going to be reliant on their last €63,500 of pension fund so the abolition of the AMRF is not going to materially affect them in any big way. 
The numbers of people who will actually be paying this additional €1,300 per year tax will be very small.


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## Gordon Gekko (3 Nov 2021)

It is a tabloid headline.

The change will benefit some people.

On the flipside, I don’t think anyone will weep for the AMRF. It was an administrative nonsense and the Nanny State gone mad.

The change is one of those rare beasts where it benefits the exchequer and nobody cares.


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## Sarenco (3 Nov 2021)

The abolition of the AMRF was one of the recommendations of the Interdepartmental Pensions Reform and Taxation Group.  It certainly wasn't motivated by a desire to raise taxes.





						Report of the Interdepartmental Pensions Reform and Taxation Group   published
					

The Minister for Finance, Paschal Donohoe TD, today (Friday) welcomed publication of the Report of the Interdepartmental Pensions Reform and Taxation Group (IDPRTG). This work delivers on a number of commitments made in the Roadmap for Pensions Reform 2018 – 2023...



					www.askaboutmoney.com
				



If you are really concerned about this issue it may make sense to transfer your pension pot to a PRSA, which can then be split in two.  You can then defer "retiring" the second PRSA until you are 75.  Problem solved.


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## Shirazman (3 Nov 2021)

bstop said:


> The change is simply that at present there is a choice as to whether 4% withdrawals are made from the 63500 euro in the AMRF. The change is that in future 4% withdrawals must be made from this 63500 euro which will be transferred to an ARF.
> There is less flexibility under the new rules which will be detrimental to many pensioners in later life..
> Some pensioners are always going to become dependant on the state. What I have pointed out is that under these new rules greater numbers of pensioners will eventually become state dependant.



But you made the specific claim above that  "..an early retiree with a large ARF who will not achieve a state pension above 12500 euro per year, *will be forced to withdraw extra large amounts from their ARF*"   and I asked you how the abolition of the AMRF would cause this to happen.

I await an answer.


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## bstop (3 Nov 2021)

Person with ARF 100000 euro and AMRF 63500 euro.
At present minimum withdrawal 4000 euro per year.
After AMRF abolishment the person has an ARF of 163500.
Minimum withdrawal is now 6540 euro per year.
6540 euro is an extra large withdrawal compared to 4000 euro.


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## RedOnion (3 Nov 2021)

bstop said:


> Person with ARF 100000 euro and AMRF 63500 euro.
> At present minimum withdrawal 4000 euro per year.
> After AMRF abolishment the person has an ARF of 163500.
> Minimum withdrawal is now 6540 euro per year.
> 6540 euro is an extra large withdrawal compared to 4000 euro.


Using your example, wouldn't the full withdrawal still be completely tax free? So how is this a tax grab? Or have I missed something?


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## bstop (3 Nov 2021)

Try adding in a state pension amount of 12000 per year for somebody who did not achieve full state pension. I took those figures to try to explain in simple terms an answer to Shirazmans question. Change to figures to a larger ARF see the effect of the tax grab I am referring too.


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## Conan (3 Nov 2021)

bstop said:


> Try adding in a state pension amount of 12000 per year for somebody who did not achieve full state pension. I took those figures to try to explain in simple terms an answer to Shirazmans question. Change to figures to a larger ARF see the effect of the tax grab I am referring too.


For a single individual, even adding in the State Pension, the total income is still below the tax threshold, so no Income Tax.
If the the ARF is larger (say €1m), then the “tax grab” is still relatively small. As others have said, the AMRF achieved nothing, was just an annoyance, and in no way is a “tax grab”, since the amount of tax is small. The headline in the article bore no relevance to the body of the articl.


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## Dave Vanian (3 Nov 2021)

bstop said:


> Person with ARF 100000 euro and AMRF 63500 euro.
> At present minimum withdrawal 4000 euro per year.
> After AMRF abolishment the person has an ARF of 163500.
> Minimum withdrawal is now 6540 euro per year.
> 6540 euro is an extra large withdrawal compared to 4000 euro.



For many people, the Income Tax on the small additional income will be zero. 

For some, it might be taxed at 20% so the additional income tax on €2,540 will be €508. 

For a small number who managed to accumulate large ARFs but somehow also managed to miss qualifying for the State Pension it might be taxed at 40% so 40% of €2,540 would be an additional €1,016 per year. 

I can't see the Minister for Finance getting too excited about this bonanza.  A "tax grab" it certainly isn't.


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## bstop (3 Nov 2021)

It's not below the tax threshold when the extra 2540 euro is added to the pensioners income next year. The overall amount of tax grab to the state may be negligible but to certain individual pensioners it is far from relatively small. 508 euro is not small charge to people on modest income.


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## Conan (3 Nov 2021)

But if the only income for a single person is c €13,100 from State Pension plus €2,540, the total is still below the tax threshold. Even for a couple getting State Pension plus Qualified Additional Payment, the total is still below the tax threshold for a couple. Your argument just does not stand up as a “tax grab”.


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## Gordon Gekko (3 Nov 2021)

bstop said:


> It's not below the tax threshold when the extra 2540 euro is added to the pensioners income next year. The overall amount of tax grab to the state may be negligible but to certain individual pensioners it is far from relatively small. 508 euro is not small charge to people on modest income.


If they’ve modest income, then they won’t be paying much tax on it, plus they’re more likely to want to access it.


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## Shirazman (3 Nov 2021)

bstop said:


> It's not below the tax threshold when the extra 2540 euro is added to the pensioners income next year. The overall amount of tax grab to the state may be negligible but to certain individual pensioners it is far from relatively small. 508 euro is not small charge to people on modest income.



But they're not paying that tax from their income, rather they are receiving extra income (i.e. 4% of their augmented AVC net of tax).  So they're actually getting more income, not less!


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## Baby boomer (3 Nov 2021)

Steven Barrett said:


> If you have €50k in an AMRF, you can take out €2,000 a year as a once off lump sum. There's no going back for a 2nd payment in the same year. What if you are 70 years of age and can't afford to heat your house or fix your car? But you have €50,000 in a pension that you can't touch? What good is getting that money at 75 when you are broke now? What do they think they will tell you when you say "but you'll have all this money when you are 75"? I'm afraid Brendan's firewalls won't allow me to print what the answer would be!


Ok, so we've gone from a situation in which you can't touch the AMRF money to a situation where you're effectively forced to draw it down or pay tax on it as if you did. 

What's so wrong with giving pensioners the choice?  Draw down or not draw down, pay tax when you do, what's not to like about that? 

You could have a situation where a retired sixty year old has an ARF, but which s/he doesn't need to draw yet, perhaps because of a part-time gig or whatever.


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## Shirazman (3 Nov 2021)

Baby boomer said:


> Ok, so we've gone from a situation in which you can't touch the AMRF money to a situation where you're effectively forced to draw it down or pay tax on it as if you did.
> 
> What's so wrong with giving pensioners the choice?  Draw down or not draw down, pay tax when you do, what's not to like about that?
> 
> You could have a situation where a retired sixty year old has an ARF, but which s/he doesn't need to draw yet, perhaps because of a part-time gig or whatever.



Surely the retired sixty year old who doesn't need to draw down extra income could simply leave the money in their PRSA until age 70?  That way they wouldn't have to pay any tax at all!


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## Baby boomer (3 Nov 2021)

Shirazman said:


> Surely the retired sixty year old who doesn't need to draw down extra income could simply leave the money in their PRSA until age 70?  That way they wouldn't have to pay any tax at all!


But then they wouldn't be able to draw down their 25% tax free amount!  The optimum strategy might well be to take that immediately and draw down the rest as tax efficiently as possible.  (Maybe wait until income drops below top tax band, etc.)


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## Sarenco (3 Nov 2021)

Shirazman said:


> Surely the retired sixty year old who doesn't need to draw down extra income could simply leave the money in their PRSA until age 70?


They could actually defer drawing on the PRSA until they are 75.

Or they could split the PRSA in two and defer drawing on one PRSA until they are 75.


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## bstop (3 Nov 2021)

Conan, the example given is a pensioner aged under 75 with a reduced state pension of 12000 and ARF + AMRF.
Pensioner age 60 to 64 income as follows,....
Total income this year 16000.....no tax 
Total income next year  18540....tax  508
The pensioner did not choose to take the extra income and may not want it. 
Result government tax grab.


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## Cavanbhoy (4 Nov 2021)

bstop said:


> Conan, the example given is a pensioner aged under 75 with a reduced state pension of 12000 and ARF + AMRF.
> Pensioner age 60 to 66 income as follows,....
> Total income this year 16000.....no tax
> Total income next year  18540....tax  508
> ...


IS not the first 18k taxfree for a 66 year old so tax wouldn't be 508


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## bstop (4 Nov 2021)

Yes you are right the tax grab would be 108 euro from that particular pensioner at age 65.
I have edited example to age 64.


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## Steven Barrett (4 Nov 2021)

Baby boomer said:


> Ok, so we've gone from a situation in which you can't touch the AMRF money to a situation where you're effectively forced to draw it down or pay tax on it as if you did.
> 
> What's so wrong with giving pensioners the choice?  Draw down or not draw down, pay tax when you do, what's not to like about that?
> 
> You could have a situation where a retired sixty year old has an ARF, but which s/he doesn't need to draw yet, perhaps because of a part-time gig or whatever.


That has nothing to do with the AMRF, it is the ARF that has imputed distribution. And the minimum levels were imposed because people were using it for inheritance planning and not for retirement income. The Revenue said that pensions are to provide an income in retirement, if you abuse the system, we will impose minimum withdrawal amounts. 

Again, the only people who complain about having to take money out of their ARF are people with lots of money. And it is more of a grumble than a serious complaint. It doesn't bother them that much. Of my clients with €2m ARF's, they withdraw their €120k+ a year, and the fund goes back up over €2m by the following year, so they are getting over €60k a year net and the value of their ARF is at least maintained. It's not an issue for them, they're not going to run out of money. 


Steven
www.bluewaterfp.ie


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## Shirazman (4 Nov 2021)

bstop said:


> Conan, the example given is a pensioner aged under 75 with a reduced state pension of 12000 and ARF + AMRF.
> Pensioner age 60 to 64 income as follows,....
> Total income this year 16000.....no tax
> Total income next year  18540....tax  508
> ...



Yep and that tax grab (sic) of €508 will make all the difference to our national debt of €250,000,000,000!   Well done Paschal - problem solved! 

Of course, if the pensioner doesn't require the extra cash then they can immediately reinvest it in (tax-free) long-term State Savings!  And no management fee to pay!  Win-win!


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## bstop (4 Nov 2021)

The tax grab of 508 euro makes a major difference to a low income pensioner.

If you think having a government forced withdrawal of 2540 euro from an ARF and then investing the after tax amount of 2032 euro at 1% per year is a "Win-win!" deal for a low income pensioner, I certainly would not want to be getting any financial advise from you.


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## Conan (4 Nov 2021)

bstop said:


> The tax grab of 508 euro makes a hugh difference to a low income pensioner.
> I would guess that you have no experience financial hardship.


If they are a “low income pensioner” then I suggest they would welcome the additional income, even if they pay a small potion in tax (20% of the AMRF drawdown).


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## bstop (4 Nov 2021)

I would suggest that if they wanted extra income they could choose to withdraw extra from their ARF. If they do not, I would suggest that that a government forced, taxed withdrawal is an unfair tax grab.


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## Steven Barrett (5 Nov 2021)

bstop said:


> I would suggest that if they wanted extra income they could choose to withdraw extra from their ARF. If they do not, I would suggest that that a government forced, taxed withdrawal is an unfair tax grab.


...or they may not have an ARF at all, only an AMRF. 

Your arguments are very weak and back up by nothing but supposition.


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## bstop (5 Nov 2021)

Steven, if you read through my previous posts you would see that I am referring to the situation next year when the pensioner will no longer have an AMRF. If you want to continue to comment on my arguements get your facts right first.


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## Shirazman (5 Nov 2021)

bstop said:


> The tax grab of 508 euro makes a major difference to a low income pensioner.
> 
> If you think having a government forced withdrawal of 2540 euro from an ARF and then investing the after tax amount of 2032 euro at 1% per year is a "Win-win!" deal for a low income pensioner, I certainly would not want to be getting any financial advise from you.



Well, seeing as you insist that your imaginary pensioner (whose low income, remarkably, is taxable at 20%) doesn't need the extra money, where would you recommend that they invest it?     Paddy Powers?   The off licence?   Magic beans?  (Dolphin Trust?  )


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## Gordon Gekko (5 Nov 2021)

This is a circular argument.

If they’ve low income, then their income is either not taxable at all or hardly taxed.

I can’t think of any real-world scenario where someone would be bothered by this.


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## Sarenco (5 Nov 2021)

bstop said:


> Pensioner age 60 to 64 income as follows,....
> Total income this year 16000.....no tax
> Total income next year  18540....tax  508
> The pensioner did not choose to take the extra income and may not want it.


In the real world, I would be very surprised if any early retiree with an annual income of just €16k would defer drawing down an additional €2,540pa from their AMRF simply to defer a relatively small amount of income tax (€308pa when you allow for tax credits).


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## bstop (5 Nov 2021)

In the real world, some financially astute people on small to moderate incomes with an ARF or AMRF who can choose their total income level by varying their yearly withdrawals, do actually set their total income to exactly match the tax free income threshold or to maximize their 20% tax band level. I know people who do this and I have helped them to calculate their optimal income level. These people are very appreciative of any tax saving and the 308 euro that you have correctly calculated would be of greater value to them than to Revenue. 
No doubt you will be surprised to learn that people like this do actually exist.


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## Sarenco (6 Nov 2021)

Now you’re changing the goal posts - the income levels in your previous example fell well below the standard rate threshold.

For imputed distributions of 4% to bring you over the standard rate threshold of €36,800, the ARF would have to exceed €920,000. 

For anybody with that level of assets, the abolition of the AMRF is a trivial matter.


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## Shirazman (6 Nov 2021)

bstop said:


> In the real world, some financially astute people on small to moderate incomes with an ARF or AMRF who can choose their total income level by varying their yearly withdrawals, do actually set their total income to exactly match the tax free income threshold or to maximize their 20% tax band level. I know people who do this and I have helped them to calculate their optimal income level. These people are very appreciative of any tax saving and the 308 euro that you have correctly calculated would be of greater value to them than to Revenue.
> No doubt you will be surprised to learn that people like this do actually exist.



I'm shocked that you haven't advised them to avail of the range of tax-free State Savings products!    No "tax grab" there!  
I trust that the advise (sic) that you give them is supplied free of charge?


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