Clarity regarding AVC drawdowns
Section 18 of the Act amends section 782A of the Taxes Consolidation Act, 1997 which introduced a mechanism whereby members could instruct trustees in writing to draw down up to 30% of their additional voluntary contribution (“AVC”) fund prior to retirement. The option can be exercised on a once off basis within a three year period (ending on 26 March 2016)
The Act clarifies that no amendment to the governing trust documentation of a scheme is required in order to allow trustees to comply with an AVC drawdown request from a member. It states that AVC drawdowns may be effected by trustees notwithstanding section 32 of the Pensions Act 1990, which relates to a general non-entitlement to a refund of contributions, and any contrary provisions which may be contained in the trust deed or rules of a scheme.
Clarity in this area is very welcome, as it was not clear whether amendments to scheme documentation were required at the time the provision was first introduced in early 2013.
The Act also implements a reduction in the standard fund threshold to €2 million. However, people who currently have entitlements in excess of €2 million may apply for a personal fund threshold up to €2.3 million, which was the previous standard fund threshold. The Act also introduces the new pensions levy of 0.15%, which was first announced in the budget last year. This levy will apply until 31 December 2015. In light of the fact that the current 0.6% levy will remain until 31 December 2014, a total levy of 0.75% now applies until the end of this year.