The Minister for Finance, Michael Noonan T.D. published Finance Bill 2014 yesterday, 23 October. A summary of the main changes impacting on pensions introduced by the Bill is outlined below.
Changes to Approved Retirement Fund (ARF) deemed distribution
These changes will not apply until 1 January 2015. Here is a summary of the changes:
Where the relevant ARF value is not greater than €2,000,000:
* 4% annual deemed distribution where the individual is not aged 70 years or over for the whole of the tax year, or
* 5% annual deemed distribution where the individual is aged 70 years or over for the whole of the tax year
6% annual deemed distribution remains where the relevant ARF value is greater than €2,000,000.
Approved Minimum Retirement Fund (AMRF) change
With effect from the tax year 2015 (1 January 2015), the beneficial owner of an AMRF may draw down up to 4% of the value of the assets of the AMRF each year, subject to taxation at the marginal rate. As things stand at the moment the only withdrawal allowed from an AMRF is limited to the income or gains from the investment of the original capital in the AMRF.
Chargeable Excess Tax on Standard Fund Threshold
The specified rate of chargeable excess tax of 41% is reduced in line with the reduction in the higher rate of income tax provided for in Budget 2015. This amendment takes effect from 1 January 2015.
This means that any capital value in excess of the Standard Fund Threshold (or Personal Fund Threshold if applicable) on retirement will be taxed at 40% (from 1 January 2015).
Other pension related changes
* Changes to how the Standard Fund Threshold works where there is a Pensions Adjustment Order in place so that the member and non-member spouse will share in an equitable manner any tax charge arising where the Standard Fund Threshold (or a Personal Fund Threshold if applicable) has been exceeded.
* Section 17 closes off a number of tax avoidance schemes that are linked to the use of ARFs and vested PRSAs (i.e. PRSAs where benefits have commenced to be drawn down). These changes take effect from 23 October 2014
* Section 63 implements the VAT decision in relation to defined contribution pension funds in the ATP Pension Services ECJ Judgement
The Bill will now be debated by both houses of the Oireachtas and is due to be enacted before the end of 2014. Further changes may be made during this time.
This information is intended only as a general guide and not as a detailed analysis. In the interests of brevity and clarity, detailed information may have been omitted which may be directly relevant to an individual’s or an organisation’s circumstances. The information is provided “as is” without warranties of any kind, express or implied, including accuracy, timeliness and completeness. It should not be used as a substitute for appropriate professional advice. In no event shall New Ireland or its employees be liable for damages whatsoever, arising out of or in connection with the information provided in this publication.
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