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.