Irish DC funds given option to defer annuity purchase
4 December 2008
Written by Sophie Baker
A new option for members of defined contribution (DC) occupational
pension schemes which will defer the purchase of a retirement annuity
for a specified two-year period has been announced by Ireland’s
Minister for Finance, Brian Lenihan.
Under current provisions, member of DC schemes are obliged to purchase
an annuity immediately upon retirement with their pension fund, after
taking their tax-free lump sum.
“I am conscious of the difficulties facing many members of Defined
Contribution schemes who are retiring at the present time and whose pension
funds have been very badly affected by the falls in equity markets and
the more general falls in asset values over the recent past,” the
Minister said. “I propose to remove the obligation on those individuals
to purchase an annuity immediately on retirement and to give them the
breathing space, if they so wish, to make a choice on when to purchase
the annuity.”
In
giving the timeframe of annuity purchase, Lenihan added that there is
no guarantee that an individual will get a better value if they postpone
their purchase to a later date, “Those individuals who are retiring
now or approaching retirement should take this into account. In this regard
and as part of this initiative, the Pensions Board will publish appropriate
risk guidance in this matter in the near future,” he added.
The deferral arrangement will be operated on an administrative basis by
the Revenue Commissioners, and members of DC occupational pension schemes
who retire between 4 December 2008 and 312 December 2010 will be offered
the new option.
