The Finance Bill 2013 provides for a once-off taxable drawdown
for individuals who have built up pension funds through Additional
Voluntary Contributions (AVCs), subject to a
number of conditions. AVCs are defined in the strict sense
and only relate to AVCS made to occupational pension schemes and
additional voluntary PRSA contributions made to a PRSA AVC.
Any funds so described but arising from sources other than actual
member AVC contributions must be excluded.
The Bill provides for a mechanism for an individual to make a
once-off withdrawal of up to 30% of the value of his/her
AVCs. This option will be available for three years from the
passing of the Finance Act 2013 (which is expected in April).
Any withdrawal will be subject to income tax at the
individual's marginal rate, but will not be subject to PRSI or
the USC.
This measure may be of value to those who have accumulated
significant AVCs in the past and need access to additional funds
now. However, employees should be aware that any withdrawal
may deplete retirement savings, leaving less money for
retirement. Amendments have been introduced at Committee
Stage which provide that the option to draw down AVCs will override
the rules of the relevant pension scheme. Pension scheme
rules will therefore not require amendment to provide for the AVC
drawdown facility if the Bill is passed with these new
provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
