The Finance Bill 2021 – The end of the AMRF

After Budget 2022 was announced a few weeks ago, the Finance Bill 2021 was published and it introduces some interesting pension reforms.

The end of the AMRF

The AMRF will be no more. This is something that we have been supporting for years and it is finally happening. We had been talking to the Revenue about it recently and they had agreed that it is not fit for purpose and we were aware it was being done away with. So what are the mechanics of

1. Any new retirements after the passing of the Finance Bill in December will not be required to meet the guaranteed income requirement.
2. Any existing AMRFs will become ARFs from 1 January 2022

This means that any AMRFs will not be subject to imputed distribution in 2021, which has a cut off date of 30 November. It also means that all of a policyholder’s retirement income is subject to imputed distribution from age 61 onwards. The removal of the AMRF requirement is definitely a good thing and allows retirees access to all of their retirement income without any limits. This is especially good news for those with small pension pots.

ARF available to Death in Service benefits

For those with death in service benefits from their employer, the tax free lump sum benefit was limited to four times salary plus the value of their own contributions. Anything over that amount had to be used to purchase an annuity. That was very unattractive to people, especially when annuity rates are so low. While trustees have some discretion on this, for those with large employer paid pension pots and death in service benefits, they were stuck with purchasing an annuity, which would then die with the surviving spouse and couldn’t be passed onto their children.

The Finance Act has introduced the ARF option to any amounts over the four time salary limit. This now allows the surviving spouse more options with regards to the management of the assets passed over on death as well as the ability to pass on the value of the ARF to their children on death.

Removal of 15 year limit to PRSAs

If you were a member of an occupational pension scheme for more than 15 years, you were unable to transfer your pension benefits to a PRSA. This time limit is now being removed. It appears that a certificate of benefit comparison will still be required if the scheme is not being wound up and the transfer value exceeds €10,000.

These changes are very much common sense changes to some of the anomalies in pension rules that will make things fairer for those impacted by them.

Steven Barrett

25 October 2021