Divorce and Pensions : 
I am attaching a excerpt from a letter recently received from an Insurance Company, regarding Pension Adjustment Orders and wether they apply to Approved Retirement Fund's (ARFS) /Approved Minimum Retirement Funds's AMRF's
It has always been vague and uncertain whether a Pension Adjustment Order (PAO) could or could not be applied to an ARF/AMRF.
Revenue Practice (Chapter 22 – Pension Adjustment Orders) states that ‘...a PAO can apply to benefits held by a scheme, buy out bond, retirement annuity contract or personal retirement savings account’. There is no mention of them being applicable to ARFs.
However 22.6 then says : ‘ A transfer from an ARF or AMRF into another ARF/AMRF in the name of a spouse in exercise of rights under a PAO will not be regarded by Revenue as a distribution from the transferring ARF/AMRF.’.
So 22.6 seems to allow you to split up an ARF or AMRF without causing a distribution, in the event of a Pension Adjustment Order. However there is no legislative basis for not applying a distribution to such ARF withdrawals; but I presume that you can rely on Chapter 22.6 to back up a decision to not apply PAYE to such a split.
However, we did recently have a case on the bank channel whereby we got confirmation from Revenue that an ARF could not have a Pension Adjustment Order (PAO) enforced against it. However, ARFs can be the subject of Property Adjustment Orders (PrAO).
PrAOs are used to split up assets such as investments, property, etc.
Therefore I would be of the view that PAOs cannot be enforced against an ARF but PrAOs can.
The above excerpt does seem to suggest that ARF's and AMRF's cannot be subject to Pension Adjustment Orders, however please contact either Jim or myself if you wish to discuss further.
Email: richard.cotter@growthinv.ie
Inheritance Tax :
The Inheritance Tax rate has been increased from 25% to 30% and the parent/child threshold of €332,084 has been reduced to €250,000.
In addition to the above, the ARF tax payable on an ARF inheritance recieved by a child over age 21 is being increased from 20% to 30%; such an inheritance is not subject to Inheritance Tax and can't therefore benefit from a CAT threshold.
Both Inheritance Tax and ARF Tax can be funded tax effieciently with a Section 60 policy (a special type of life policy).
Inheritance |
2008 |
5/12/2011 |
After 6/12/2011 |
% Change |
|---|---|---|---|---|
€300,000 |
Nil |
Nil |
€15,000 | |
€500,000 |
Nil |
€41,979 |
€75,000 | |
€750,000 |
€45,758 |
€104,479 |
€150,000 | +228% |
€1,000,000
|
€95,758 |
€166,979 |
€225,000 | +135% |
€2,000,000 |
€295,758 |
€416,979 |
€525,000 | +78% |
| €3,000,000 | €495,758 |
€666,979 |
€825,000 | +66% |
| €4,000,000 | €695,758 |
€916,979 |
€1,125,000 | +62% |
| €5,000,000 | €895,758 |
€1,166,979 |
€1,425,000 | +59% |
(Source: Tony Gilhawley of Technical Guidance)
In 2008 an Inheritance of €1,000,000 would have attracted tax of €95,758, however now this would attract tax of €225,000 a whopping 135% increase!
Please contact either Jim or Richard if you wish to review your potential Inheritance tax/Arf exposure and section 60 life provision.
Email: richard.cotter@growthinv.ie
Insolvency & Pensions:
NINE COMPANIES WERE declared insolvent in Ireland every single day in October!
Many compaines are being declared Insolvent and the Liquidators are moving in. Worringly there appears too be no advice given in relation to Employees and Owners of these companies and their Company Pension Schemes.
This has raised quite a few points to consider.
Namely: what is the best path for an individuals pension funds going forward in terms of investment, what are the potential tax breaks and how best to utilize same.
This in turn has led to questions such as:
- At 50 years of age, can you take a lump sum without retiring?
- If a person withdraws their funds from the company pension scheme before they leave, can they still access the €10k lump sum (lump sum waiver) as well as full top slice utilization?
- If they withdraw the funds which is the best option: PRSA or bond or other? What are the fundamental differences?
- Can you get a higher sum in the redundancy package options depending on whether you set up a PRSA or bond or other?
- What are the risks associated with the above type of moves given the newness of PRSAs?
- If you accept the waiver to taking a lump sum up to 25% at age 50, does it apply to just the company pension fund? Is it only that part of the fund that pertains to the company that is closing ie does it affect funds that you have transfered from previous schemes as well? Does it impact funds that are seperate to what is in the company pension fund ie previous funds that an individual invested in independent bonds/PRSAs?
- Should the Trustees wind up the Scheme and if so how?
As you can see, there are quite a few questions people have around the whole area. If you have a friend or you
Contact Jim or Richard for more information.
Email: richard.cotter@growthinv.ie
Household Charge
The Household Charge is an annual charge which is payable by owners of residential property. It is a matter for owners of residential property to register and pay the household charge.
The Charge
The household charge of €100 is payable from 1 January 2012 and subject to a limited number of exemptions and waivers, must be paid by 31st of March 2012. It is levied on each residential unit, regardless of whether or not the owner is occupying the unit. It applies to non principal private residences subject to the NPPR levy e.g. holiday homes. Where a house is converted into flats or bedsits, the household charge will apply to each flat or bedsit.
How to Pay
go to - www.householdcharge.ie - to pay online. In addition, home owners can make the payment by cheque, postal order, etc through the post to the Local Government Management Agency. Payment will also be accepted in the offices of your County/City Council.
Direct Debit Option
If you wish to pay by installments, the Direct Debit Mandate must be set up by 1st of March 2012. The household charge can be paid in four instalments of €25 by direct debit.
Dates for 2012 are as follows:
- Instalment number 1: 13th March 2012
- Instalment number 2: 14th May 2012
- Instalment number 3: 13th July 2012
- Instalment number 4: 10th September 2012
Late Payments
An owner of a residential property who does not pay a household charge or an instalment by the due date will be subject to late payment fees and late payment interest. The late payment fee to apply in the case of a household charge paid:
- not later than 6 months after the due date, is 10% of the amount outstanding;
- later than 6 months and not later than 12 months after the due date, is 20 % of the amount outstanding; or
- later than 12 months after the due date, is 30 % of the amount outstanding.
In addition, late payment interest of 1% per month or part thereof will apply to unpaid amounts.
Contact Jim or Richard for more information.
Email: richard.cotter@growthinv.ie
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