The Finance Act 2021, signed into law on 22nd December 2021 puts into legislation changes announced in the October 2021 Budget. Within same, there were a number of important updates for those Individuals with Approved Minimum Retirement Funds (AMRF’s) and Vested Personal Retirement Savings Accounts (PRSA’s). The Finance Act included amendments to legislation which were set out in the report of the Interdepartmental Pension Reform and Taxation Group (IDPRTG) in November 2020.
Removal of the specified income requirement/AMRF
With effect from 22nd December, the requirement to have the specified pension income of €12,700 p.a. or have €63,500 invested in an AMRF in order to invest in an ARF/take taxable cash has been removed. The effect being, that an individual is no longer required to qualify under the above requirements to purchase an Approved Retirement Fund (ARF).
In addition, the following three changes were brought into effect:
1. Conversion of existing AMRF policies
From 1st January 2022, all AMRFs are required to convert to ARFs. Any existing AMRF will be automatically converted to an ARF on all systems.
2. AMRF Clients with existing ARF polices with the same institution
Where a Client also has an ARF with a particular institution and has a regular income set up, the new ARF policy (i.e. converted AMRF Contract) will replicate the frequency of the existing ARF income and the payment will be set up for the minimum amount liable under imputed distribution rules.
3. Vested PRSAs
The requirement to set aside €63,500 of a vested PRSA Plan has been removed following the passing of the Finance Act. Vested PRSA Clients now have access to the full value of their vested PRSA Contract and will be subject to imputed distribution requirements where applicable.
Most Institutions have commenced a communication process to all AMRF and Vested PRSA Clients, outlining the changes that have come into effect. Within such communications, Clients will be advised on how they will apply any imputed distribution where applicable and request bank account details, to facilitate payments, if not already on file.
Additional important changes
- Changes to the rules for transfers from Occupational Pension Schemes (OPS) to Personal Retirement Savings Accounts (PRSA).
With effect from 22nd December 2021, the requirement to have less than 15 years scheme service on transferring from an OPS to a PRSA has been removed.
- Death In Service – Changes to options for dependants
With effect from 22nd December 2021, the requirement under an OPS to purchase a dependant’s annuity following the payment of the Revenue maximum lump sum on death in service now extends to allow dependants to purchase an ARF as an alternative.
These are significant and sensible changes and are to be welcomed.