Revenue Change Specified Income Rules.
As it is known, any individual who wishes to exercise an “ARF option” on retirement and who does not have “specified income” of €12,700 p.a. must place €63,500 in an vehicle called Approved Minimum Retirement Fund.
Recent increases in the State pension rate mean that anyone qualifying for a full pension will satisfy the specified income requirement at age 66, however, this remains an issue for individuals with modest levels of retirement savings who retire prior to age 66.
This is due to the level of state pension being based on the yearly average of PRSI contributions from the time one first enters the PRSI system until the point of retirement.
Recently, Revenue advised that the pension “Christmas bonus” may be taken into account for the purposes of the specified income test.
Further communication from Revenue on their eBrief No. 112/19 has amended 23.5 Revenue Pensions Manual to allow certain additional payments made by DEASP (current name for Department of Social Welfare) to be included for the specified income test. The payments are:
Fuel Allowance: This is a means tested benefit worth €22.50 per week, or €585 p.a., payable for 6 months from October to March.
Household Benefits Package: This is a monthly allowance of €35, or €420 p.a., towards electricity/gas costs. A free TV licence, worth €160, is also payable.
Telephone Support Allowance: This is €2.50 per week or €130 p.a.
An individual who is in receipt of all of the above payments can increase the level of specified income by €1,295 p.a. The rule change has limited impact but will assist those who do not qualify for the full rate of State pension due to insufficient PRSI contributions.
Source – ©Clive Slattery. 22 June 2019
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The particular tax treatment contained herein is based on Harvest Financial Services Limited’s understanding of current Revenue practice as at June 2019. Please note that the tax treatment depends on the individual circumstances of each client and may be subject to change in the future. You should take such independent tax advice as you deem appropriate.