1. Members Seminar Presented by: Eugene Foley Paul Dunne Clive Slattery 5 th December 2013

2. AGENDA  Revenue Commissioners Update  Finance Bill Summary - presented by Clive Slattery  AIFMD and Exempt Unit Trusts  Trustee Training  Pensions Board Update  CRO and Receiverships

3.  Main focus is on DB schemes Revenue Commissioners Update Multiple OPS with benefits being paid from DB & DC. Revenue asked for submission for sample and examples. CHC schemes – Revenue have said that a letter should be sent to them with an undertaking that any assets which cannot transfer due to the Central Bank restriction, will be transferred when it is capable of doing so. There is no further update on the eligibility of PRSAs to fall within the Ireland/UK Double Taxation Agreement

4.  Main focus is on DB schemes Revenue Commissioners Update Finance Bill 2013 - New penalties introduced would relate to online applications for personal fund thresholds, expected to be available from Feb 2014. Manual applications can be submitted prior to the online applications being available. Professional added years don’t vest equally over the term until retirement and the calculation and what multiple is to be used is with Policy for review Currently negotiating a common Trust Deed that members could adopt

5.  Main focus is on DB schemes Revenue Commissioners Update A gain from an AMRF drawdown can be deducted from ARF distribution calculation at year end. Shares must be sold in cases of early retirement due to ill-health

6. Finance Bill Update Presented by Clive Slattery, mobile: 087 6791759 email: cslatz1@gmail.comcslatz1@gmail.com Review main points from Finance & Social Welfare Bills that will impact on administrators & clients. More text less importance. These new Regulations will fundamentally change the way we get around them. What do we need to tell clients? Big difference: measures w.e.f 1 January 2014

7. Finance Bill Update WHAT’s IN SECTION 18 Older Public Sector schemes provide for contributions to be paid for spouse/children pensions by deduction from retirement lump sum. Individuals who took early retirement under the 2009 scheme, must wait until age 60 to get 90% of TFLS. Confirms that where deductions are made from LS balance relief will be given.

8. Finance Bill Update EARLY ACCESS to AVCS Amends Sec.782A to strengthen existing override provisions. Concerns that some rules/contracts don’t allow early access. Provides that option may be exercised notwithstanding rules/contract don’t facilitate. No longer necessary to amend rules/contract.

9. Finance Bill Update Reduction in Standard Fund Threshold Reduced to €2M w.e.f. 1/1/2014. Some scope for additional funding to €2.3M before 31/12/2013. Probably seek to retire immediately. Fund growth will create Chargeable Excess Tax liability.

10. Finance Bill Update Personal Fund Threshold Those with funds between €2M and €2.3M will need to apply for a PFT. Revenue developing an electronic system for future PFT notifications. Must include statements from administrators certifying information in the notification. Existing holders of a PFT are not affected.

11. Finance Bill Update Lump Sum SFT reduction has a consequential effect on lump sums. Convoluted methodology in Sec.790AA. “tax free amount”: 200,000. “standard chargeable amount” is calculated using a formula: SFT divided by 4 less the tax free amount.

12. Finance Bill Update Sec. 790AA “excess lump sum” is the amount by which the lump sum received exceeds the tax free amount and is taxed @20%. BUT any amount of the excess lump sum that exceeds the standard chargeable amount is treated as income of the individual and is taxed @ marginal rate.

13. Finance Bill Update Plain English No change to existing 200K tax free amount. Previous amount taxable @20% is reduced from 375K to 300K as the standard chargeable amount has been reduced from 575K to 500K. 75K taxed @ higher rate, plus USC, PRSI. Additional liability 24,000. Take lump sum before year end.

14. Finance Bill Update Valuation of DB Pensions. Benefits accrued to 31/12/2013 continue to be valued by applying the 20 factor to the annual pension. Benefits accrued from1/1/2014 valued by applying an age-based factor. The later you take benefits, the lower the factor.

15. Finance Bill Update DB Factors Age FactorAgeFactor 50 (&under)376129 51,52366228 533563,6427 54346526 55,56336625 573267,6824 5831 6923 59,603070 +22

16. Finance Bill Update Public Service Example Asst. Sec., Salary 120K, age 50, NRA 65, will have 40 years service, assume salary @NRA 150K. Pension 50% plus LS 1.5 salary. Pension 75K, LS 225K Previously valued @ 75K x 20 1,500,000 + 225,000 1,725,000

17. Finance Bill Update Revised Valuation Accrued to 31/12/2013 150K x 25/80 = 46,875 From 1/1 2014 150K x 15/80 = 28125 46875 x 20 = 937,500 28125 x 26 = 731,250 Lump sum = 225,000 Valuation = 1,893,750.

18. Finance Bill Update Impact of Factors Age when benefits are taken is important. Main relevance to those some distance from retirement. NRA 66 using factor of 25 (previously 20) for benefits accrued from 1/1/2014 Discourage high earners from joining or remaining in a DB scheme Impact on future early retirement calculations.

19. Finance Bill Update Issues for DB Calculations more complicated. Retain details as at 31/12/2013. Revaluing benefits on age, lower as you get older. Continue scheme membership? Transfer to DC. Design new remuneration packages.

20. Finance Bill Update Example Executive age 50, new position 1/1/2014. NRA 60, 10 years service, 2/3rds pension. Net SFT (after 200K LS) = 1.8M Age 60 factor is 30. Max. pension is 60K Less any retained benefits.

21. Finance Bill Update Payment of Chargeable Excess by Public Servants Existing reimbursement options amended & extended. Maximum amount recovered from lump sum reduced from 50% to 20%. Reduce gross pension payable over a period of up to 20 years.

22. Finance Bill Update Penalties New fixed penalty system applies to any person who fails to comply with any obligations imposed by Chapter 2C or Schedule 23B. Fixed penalty of €3,000 for each “failure”. Administrators beware!

23. Finance Bill Update Attack on Savers Upward rate trend continues. DIRT & Exit tax rates now 41%, same as earnings. Are long term savings better off in a pension product? Impact of pensions levy is a problem. Still get marginal rate relief on contributions.

24. Finance Bill Update Redundancy Payments (1) In general all redundancy payments are taxable except: Statutory redundancy payments Payments made on account of injury or disability Any relief that may be due if in respect of a foreign employment.

25. Finance Bill Update Redundancy Payments (2) Taxable Amount of the Payment can be reduced: Basic exemption: 10160 plus 765 for each full year of service. Increased exemption: Additional 10000 if not a member of a pension scheme or if you irrevocably waiver your entitlement to a pension scheme lump sum. This amount is reduced by pension scheme lump sum.

26. Finance Bill Update Redundancy Payments (3) SCSB: This method attractive for high earners with long service. The exempt amount is calculated using a formula: A x B/15 – C. A= average remuneration for last 36 months service. B = number of complete years service C = value of TFLS from pension scheme ( maximum 200K).

27. Finance Bill Update Redundancy Payments (4) Joe has 18 years service, redundancy lump sum 60K, pension scheme lump sum 11K, salary last 36 months 95K. Basic exemption 23930 ( 10160 x 765 x 18) Increased exemption: NIL (pension scheme lump sum more than 10K) SCSB: 27,000 ( 95000/3 x 18/15 – 11000)

28. Finance Bill Update Redundancy Payments (5) Effective lifetime cap of €200K. Top slicing relief abolished for amounts in excess of this last year. Now extended to all payments. TSR ensured that payment not taxed @rate higher than average rate in previous 3 years. Use pension scheme top up as an alternative to taxable severance payment.

29. Finance Bill Update Pension Levy Section 67 confirms the revised arrangements. 2014: increase from 0.6% to 0.75%. 2015: 0.15%. Rationale: Waterford Glass case? Minister claims misleading information Retire prior to 30 June. Defer contributions to July.

30. Finance Bill Update Tax Return Filing Date Revenue consultation paper on 15/10/13 (eBrief 43/13). Proposed changes to 2014 Pay & File dates. Budget brought forward from December to October. Need accurate information on tax receipts to frame the Budget. Already have Preliminary Tax figures!

31. Finance Bill Update 2014 Return Date? Preferred date is 30 June. Pay tax 4 months earlier? Cash flow issues for clients. Knock on effect for pension contributions. Small U-Turn: no change for 2014 Final decision awaited.

32. Finance Bill Update Social Welfare Bill Last year’s announcement of extension of PRSI to unearned income is in Section 3. Extends PRSI liability to employed contributors and pensioners under age 66 who have unearned income ( investment, dividend, deposit interest, rents). Chargeable @4% (class K) but no benefits. PAYE taxpayers who have other income of €3,174 p.a.

33. Finance Bill Update Mitigating SFT Impact Early retirement Overseas transfer Create surplus Split or Defer Benefits Mix of public & private sector benefits AVC early access SFT only becomes an issue when there is a BCE Death benefits if a large fund.

34. Finance Bill Update Early Retirement Access benefits before fund hits SFT. Must be genuine retirement. 20% director shares issue. Restructure business. Self-employed May create other problems: bank, customers

35. Finance Bill Update Overseas Transfer Creates a BCE so “caps” benefits Revenue circular 19/04/2012 Use of an overseas transfer payment to circumvent Irish pension tax legislation and rules would be contrary to Irish approval conditions Transfer should be for bona fide reasons Individual must complete & submit a Declaration stating the reason for the transfer

36. Finance Bill Update Points to Consider Who is the new Provider? Do you need to move to get a result? Costs How will any lump sum received be treated for Irish tax purposes? Other rules in Chapter 13

37. Finance Bill Update Create Surplus Reduce salary to reduce “final remuneration”. Wind up scheme. Surplus returned to employer. Use funds as pension contribution for spouse.

38. Finance Bill Update Split/Defer Benefits Prior to retirement transfer benefits into a number of PRSAs. BCE only occurs when PRSA is “vested”. On death PRSA paid to estate. 4 times salary problem.

39. Finance Bill Update Case Study (1) Client age 61, big DC fund from previous employment, small consultancy business with single member scheme. Total funds 1.8M Transfer previous DC to Newco scheme. Close Newco scheme & transfer to 4 PRSAs Split: 800K, 300K, 300K and 400K. Take 200K LS from PRSA 1, balance to ARF/AMRF.

40. Finance Bill Update Case Study (2) Option to use some ARF funds for annuity purchase. Taxable withdrawal available from ARF at any time. Vest another PRSA to take more cash @ 20%. No imputed distribution until PRSA vested. Diversify investments: long term growth. Control, Flexibility, Tax Efficient

41. Finance Bill Update Defer Benefits (1) What happens if you have funds in a PRSA & you never take benefits? The legislation, Sec.787K (1) (c) (ii), confirms that PRSA assets may not be paid to the owner “after he or she attains the age of 75”. The intention of the legislation was to make age 75 the latest permissible retirement age. A joint Revenue/Pensions Board FAQ document issued to PRSA Providers, (last updated in May 2009), states: “You may take benefits at any time once you reach age 60, but they must commence before age 75”.

42. Finance Bill Update Defer Benefits (2) This stance was modified by Revenue in a Q & A document circulated by the Irish Insurance Federation in May 2011: “If an individual leaves a balance in the PRSA beyond the age of 75 then no further withdrawal may be made during his/her lifetime and the PRSA balance is payable to his/her estate.”

43. Finance Bill Update Check List Internal procedures: SFT, PFT, BCE. Record keeping for DB: review system Clients wishing to act before year end: contributions and/or retirement. PFT Applications. More clients with potential SFT issues. Don’t get fined.

44. AIFMD and Exempt Unit Trusts  CB delay in responding to submissions on CP68  Prospect of Grandfathering  Applic for AIFM status to commence in Feb

45. Trustee Training  Trustee Training is required within 6 months of appointment and at least every two years thereafter  Where a person is already trustee prior to the 1 Feb 2010, training was required to be completed before 1 Feb 2012 and every two years thereafter

46. Pensions Board Update  APTI attended the public consultation on future of DC schemes  Written response to the consultation paper has been submitted

47. CRO and Receiverships  1 st stage of the Companies Bill passed, effectively closed to submission from APTI  Alternatives being discussed where a Receiver is appointed over the assets of a pension trust

48. QUESTIONS?