E-Update 28 November 2018

28/11/2018 Posted by IAPF | Comments(0)

IAPF Investment Survey Results

The IAPF Investment Survey gives a valuable overview of the Irish pension landscape. The Survey gathers information from investment managers in the Irish market and also from larger schemes, To view the full findings for the year ended 2017, members should click here.

State Pension & Christmas Bonus

Revenue’s High Wealth Individual Division has asked us to convey this to all IAPF members:

Calculation of specified income in the year 2018 and following years where a Christmas bonus might not be announced until October in the year and legislated for at a later date.

Where an individual’s pension income, inclusive of the Christmas bonus, meets the specified income test, it will not be necessary to revisit the matter in relation to the bonus (regardless of whether it is paid or not in a later year).

The multiplier of 52.18 used to calculate the yearly income is acceptable to Revenue. The inclusion of social welfare benefits paid in respect of a qualified adult as guaranteed income of the qualified adult for ARF purposes is also acceptable to Revenue.

Whether the use of “will allow” and “may” in Chapter 23.6 of the Pensions Manual could imply a choice for individuals in whether or not the Christmas bonus is taken into account for AMRF purposes (i.e. in converting an existing AMRF into an ARF or in considering if an AMRF is required in the first instance):

Revenue’s historic approach has been that, as the Christmas bonus is not fixed in amount or guaranteed from year to year, it has not been regarded as “specified income” within the meaning of section 784C(4) TCA 1997, which is a pension or annuity payable for the life of an individual. However, following a review by Revenue, it was decided to allow individuals to take their December 2017 Christmas bonus (and subsequent bonus’ if paid) into account for specified income purposes. The amendment to Chapter 23.5 of the Revenue Pensions Manual is couched in these terms and it is clear that the purpose of the revised practice is to provide individuals with an opportunity they would otherwise not have had, rather than to require them take an action they might not want to take.

The wording used in Chapter 23.5 confirms that specified income is pension income payable for life, but provides that the Christmas bonus payable under Social Welfare (Temporary Provisions) Regulations may be taken into account for specified income purposes.

This means that existing AMRF owners or individuals retiring in the future cannot be advised that Revenue requires the Christmas bonus to be included for specified income purposes. Any advice given in relation to the Christmas bonus must clearly state that it is optional to include the bonus for specified income purposes.

Pension Manual Changes

Revenue has also amended the Pensions Manual. This is available on their website.

Brexit

While the precise outcome of Brexit is still somewhat unclear, it is coming towards a conclusion. With a deal on the table we should know over the coming weeks whether it will be accepted or not by the UK Parliament. It is difficult for pension funds to plan for Brexit until all the implications are known. However, there some thing that you should be considering. If you have any UK based service providers, you should be discussing with them the plans they have to ensure they can continue to provide those services when the UK leaves the EU. Cross-border schemes should particularly consider the options they might have in order to continue the scheme on that basis. Schemes should also consider any implications for payments they might make to pensioners in the UK and whether they might be impacted. We will return to this issue as it becomes clearer but it should be on all trustees’ agenda.

Consultation Responses

Consultations have now closed for the Department of Employment Affairs and Social Protection's Consultation Paper: A summary of the Automatic Enrolment (AE) proposal for employees into a retirement savings system. The IAPF Council and Committees collated input from our members and submitted on your behalf.

Our response, alongside our response to the Pensions Authority’s consultation document Regulation of defined contribution master trusts and the IDPRTG’s consultation paper on Supplementary Pensions Reform is on our website

TCA Changes to Pensions

The Minister for Employment Affairs and Social Protection, Regina Doherty T.D., confirmed that the Total Contributions Approach (TCA) was included in the Social Welfare Bill approved by Cabinet. This will clear up a previous anomaly which saw people awarded less than maximum rate, on post Budget 2012 rate bands.