State Pension & Christmas Bonus
Tue Dec 11 2018
Please see below clarification from John O’Neill of the Department of Revenue in relation to the inclusion of the Christmas bonus towards the guaranteed income limit of €12,700.
As you are, no doubt, aware Revenue has recently made a decision to permit the inclusion of the Christmas bonus towards the guaranteed income limit of €12,700. We received a number of queries on this issue from the pensions industry to which I have responded. Please see below my response to these queries which I would ask you to pass on to the members of APTI.
Calculation of specified income in the year 2018 and following years where a Christmas bonus might not be announced until October in the year and legislated for at a later date.
Where an individual’s pension income, inclusive of the Christmas bonus, meets the specified income test, it will not be necessary to revisit the matter in relation to the bonus (regardless of whether it is paid or not in a later year).
The multiplier of 52.18 used to calculate the yearly income is acceptable to Revenue. The inclusion of social welfare benefits paid in respect of a qualified adult as guaranteed income of the qualified adult for ARF purposes is also acceptable to Revenue.
Whether the use of “will allow” and “may” in Chapter 23.6 of the Pensions Manual could imply a choice for individuals in whether or not the Christmas bonus is taken into account for AMRF purposes (i.e. in converting an existing AMRF into an ARF or in considering if an AMRF is required in the first instance).
Revenue’s historic approach has been that, as the Christmas bonus is not fixed in amount or guaranteed from year to year, it has not been regarded as “specified income” within the meaning of section 784C(4) TCA 1997, which is a pension or annuity payable for the life of an individual. However, following a review by Revenue, it was decided to allow individuals to take their December 2017 Christmas bonus (and subsequent bonus’ if paid) into account for specified income purposes. The amendment to Chapter 23.5 of the Revenue Pensions Manual is couched in these terms and it is clear that the purpose of the revised practice is to provide individuals with an opportunity they would otherwise not have had, rather than to require them take an action they might not want to take.
The wording used in Chapter 23.5 confirms that specified income is pension income payable for life, but provides that the Christmas bonus payable under Social Welfare (Temporary Provisions) Regulations may be taken into account for specified income purposes.
This means that existing AMRF owners or individuals retiring in the future cannot be advised that Revenue requires the Christmas bonus to be included for specified income purposes. Any advice given in relation to the Christmas bonus must clearly state that it is optional to include the bonus for specified income purposes.
