Pension Buy Out Ponds (BOB) and ARF

DI Dwyer

Revenue rules (eBrief No.72/11) state that pension BOBs transferred from pension schemes before 6th Feb 2011 do not attract the ARF option on retirement.
Any body know if the BOB was to be transferred into my existing Company scheme as an AVC whether it would qualify for the the ARF option.
given; I do qualify to avail of an ARF and my present company scheme allows the ARF option :cool:

The J Stands for Jay

If your current scheme allows ARF options (either by you being a director or by the trustees having changed the scheme rules to allow it), then any transfers in will also be ARFable.

DI Dwyer

Ok Mc, thanks for that. I'm waiting for a reply from the Pension Board to confirm.............I don't understand why Revenue don't allow direct ARF use for PRBs.... What do they believe they are going to lose ??.... I'll post what the P Board says..

The J Stands for Jay

DI Dwyer wrote: »

Ok Mc, thanks for that. I'm waiting for a reply from the Pension Board to confirm.............I don't understand why Revenue don't allow direct ARF use for PRBs.... What do they believe they are going to lose ??.... I'll post what the P Board says..

Nobody knows what Revenue are thinking. A complaint to the Pension Ombudsman may swing things more favourably.

DI Dwyer

Got following reply from Pensions Ombudsman...
"..........can only assume that Revenue are trying to ensure that the same treatment as is made available to members who withdrew and now hold benefits in a buyout bond as was and is afforded to plan mambers.
However, for reasoning behind there stance, you would have to direct your query to the Revenue."

Not quite sure what the first para is saying....

DI Dwyer

Received the following from the Pensions Board ;

".....Plase note that the Pensions Board remit does not cover ARFs/AMRFs.
For information on the rules around ARFs and AMRFs you may wish to review the Revenue’s website (see chapter 23). I have provided the relevant link below:
http://www.revenue.ie/en/about/foi/s16/templates/pensions
Should you require any clarification on the above link or attached document you will need to contact Revenue directly.

Office of the Revenue Commissioners
Financial Services Pensions Division
Ballaugh House
73-79 Lower Mount Street
Dublin 2

Tel: 01-6131800 (Ask to be put through to Pensions Unit)
Fax: 01-647-4212
E-mail: lcdretirebens@revenue.ie

Liam D Ferguson

The issue of whether or not a BOB has ARF options is one that I know some of the pension companies have brought up as an anomaly with Revenue on several occasions, but to date the anomaly continues.

Revenue clarified that the retirement options on a BOB should follow the retirement options of the scheme from which the monies came. So a BOB that comes from a Defined Benefit scheme would not have ARF options as the transferring scheme doesn't either. A BOB that comes from a Defined Contribution scheme post February 2011 would have ARF options, as long as the DC scheme rules had been updated to allow ARF options in respect of ordinary contributions.

The above two examples are straightforward enough. But where it gets more complicated is in other examples, such as...

• A BOB came from a DC pension scheme which wound up pre-February 2011. The scheme didn't have ARF options so the BOB doesn't.
• A BOB came from a DC scheme where the BOB was created pre-February 2011 but the scheme continues to exist. The scheme changed its rules in 2011 to allow ARF options. But the BOB was created before the rule changes.

There's a body of opinion which says that a BOB is, by definition, a Defined Contribution pension product and so should have ARF options regardless of what the rules of the original scheme were. Personally I'd agree with this but for the moment Revenue are sticking by their rules that the availability of ARF options on a BOB will be determined by whether or not the transferring scheme offered them.

DI Dwyer

Yes Liam,, but the question still is....Why? .... Nowhere do revenue give a reason for the stance... what do they believe they will lose?
..

Liam D Ferguson

DI Dwyer wrote: »

Yes Liam,, but the question still is....Why? .... Nowhere do revenue give a reason for the stance... what do they believe they will lose?

I honestly don't know what Revenue were thinking when they implemented the rule that retirement options must follow those of the transferring scheme.

Off the top of my head, I can think of one possible reason. If someone was in the (rare) position that they had a fully funded deferred benefit from a Defined Benefit pension scheme, then in theory they could fall prey to an unethical salesman convincing them to give up their guaranteed pension in return for getting the ARF options by switching to a PRB. Something loosely akin to this occurred in the UK some years ago and was subsequently unwound as a mis-selling scandal.

But there would be plenty of other ways of protecting consumers without applying this blanket rule.

DI Dwyer

How are BOBs treated wrt AMRFs....

The J Stands for Jay

DI Dwyer wrote: »

How are BOBs treated wrt AMRFs....

Assuming the ARF option is available, there is no difference in the AMRF requirement is: either must have specified income of €12700 or invested €63500 in an AMRF or annuity before being able to invest in an ARF