The Finance Bill has changed the tax rules in relation to Approved Retirement Funds (ARFs), the structures into which many people move their defined contribution pensions on retirement.

In 2011, the Government increased the “imputed or notional distribution of assets” – the amount Revenue assumes a person will draw down from their ARF each year – to 5 per cent.

Revenue then taxes this amount of the fund at a person’s marginal rate, regardless of whether they actually take it from the fund.

At 5 per cent, the fund would be fully used in 20 years. With many people living into their 80s and enjoying 25 years or more of retirement, it was argued the 5 per cent figure would lead to people living their final years in penury.

Revenue has clearly acknowledged the argument, and the Finance Bill lowers the imputed drawdown rate to 4 per cent, meaning an ARF will now last 25 years after retirement.

"The purpose of the change is to reduce the risk that the owners of ARFs in these circumstances will outlive their retirement funds," the Department of Finance states.

Tax avoidance

Imputed drawdown was introduced to stop people using ARFs as a tax-avoidance measure.

The Finance Bill, which gives effect to the measures contained within the Budget, also includes a provision abolishing VAT on green fees at member-owned golf clubs. The move reflects compliance with a European Court of Justice decision and will apply from March 1st next year.

It has meanwhile emerged that a separate measure in the Bill will specifically assist multinationals that control large volumes of data about their customers to substantially reduce their tax bills. Such companies would include Twitter, LinkedIn and Google.

Experts in taxation believe the change will help to offset the closure of the so-called “Double Irish” tax loophole.