Lucas Financial Consulting Ltd

There were a number of pension related changes, some of which were not previously flagged in Budget 2015 and these are detailed in Section 17 of the Finance Bill 2014.

The following changes take effect from January 2015:

ARF and AMRF Drawdown – Changes to Imputed Distribution Regime

The Background

From 2012, ARFs and Vested-PRSA-ARFs became subject to Imputed Distributions on an aggregate basis. The Imputed Distribution is based on the market value of all ARFs and Vested-PRSA-ARFs beneficially owned by an individual on 30 November in a tax year and takes into account any actual deductions made during that year. An Imputed Distribution applies for a year of assessment where the ARF owner is 60 years of age or over for the whole of that year (and in respect of ARFs created on or after 6 April 2000).

An Imputed Distribution is calculated as follows:

(i) where the value is €2m or less, the Imputed Distribution is equivalent to 5% of that value less the value of any actual distributions in that year.

(ii) where the value of the assets is greater than €2m, the Imputed Distribution is equivalent to 6% of the full value (i.e. not just on that part of the fund that exceeds €2m), less any actual distributions in that year. Actual Distributions include withdrawals from ARFs and Vested-PRSA-ARFs and withdrawals of growth from AMRFs.

Finance Bill 2014 – Reduction from 5% to 4%

The Finance Bill 2014 introduces a reduction from 5% to 4% in the rate of the annual Imputed Distribution of the assets of ARFs and Vested-PRSA-ARFs. This reduced rate applies in cases where the owner of the ARF or Vested-PRSA is aged between 60 and 70 years and the aggregate value of assets in the ARFs or Vested-PRSA-ARF in the ownership of such individuals is €2 million or less. The purpose of the change is to reduce the risk that the ARF owners will outlive their retirement funds (by reducing the possibility of the fund running out).

Change to Drawdown Facility for AMRFs

Also, for the first time, the new provisions will allow a maximum annual withdrawal of 4% (subject to taxation) from an AMRF (but not, it appears, from Vested-PRSA-AMRFs). At present the initial capital transferred into an AMRF cannot be withdrawn other than to purchase an annuity. However, any income or gains made by an AMRF may be withdrawn and such withdrawals are taxable in the same manner as distributions in respect of assets held in ARFs. These AMRF withdrawals can be deducted / offset from the ARF Imputed Distribution amounts.

 Important Note – after 1 January 2015, it will NO LONGER be possible to withdraw income or gains made by an AMRF in excess of 4%.

Contact Your Local Independent Financial Adviser

Lucas Financial Consulting Ltd is based in Carrickmacross Co Monaghan. As we straddle four counties – Louth, Monaghan, Cavan and Meath we are ideally placed to become your new Local Independent Financial Adviser.