Minister for Finance Brian Lenihan has announced he is to provide an option for members of defined contribution occupational pension schemes to defer the purchase of a retirement annuity with their pension funds for a specified two-year period.
Currently members of these schemes are obliged to purchase an annuity immediately upon retirement with their pension fund after taking their tax-free lump sum.
Mr Lenihan said he was "conscious of the difficulties facing many members of defined contribution schemes who are retiring at the present time."
"These people's funds have been very badly affected by the falls in equity markets and the more general falls in asset values over the recent past.
"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."
Mr Lenihan stressed, however, that taking the option to defer would not guarantee better value. He said the Pensions Board would be publishing "appropriate risk guidance" on the matter shortly.
Under the deferral arrangement, which will be operated on an administrative basis by the Revenue Commissioners, members of defined contribution occupational pension schemes who retire in the period from today to December 31st 2010 will have the option of taking their tax-free lump sum and purchasing a retirement annuity immediately on retirement or to take the lump sum and defer the annuity purchase, subject to agreement with their scheme trustee, up to and including December 31st 2010 by which date the concession of an option will end.
The Revenue Commissioners are finalising the detailed arrangements of this initiative with the pensions industry.
The Institute of Chartered Accountants in Ireland (ICAI) cautiously welcomed the announcement this afternoon.
ICAI tax director Brian Keegan said it would help people in defined contribution schemes ensure that they have more choices for the money they have built up when they reach retirement age.
"The ICAI notes that the new arrangements will be operated on an administrative basis by the Revenue Commissioners, and looks forward to seeing the full details of the proposals," he said.