Plans to change the rules governing pensions for the self-employed have been welcomed in principle by those in the pensions industry, but they said the detail of how such retirement funds could be invested would be crucial.
The Minister announced that self-employed people would not be restricted to the one option on retirement of investing their accumulated pension fund, net of the tax-free lump sum, into a traditional-type annuity.
The announcement was welcomed because it recognised that annuity rates are based on low interest rates at present. Pension providers said the details would have to be carefully worked out.
"Any reforms in this area need to be fully thought through so that we avoid the nightmare of pensioners being left destitute because their savings funds have run out," Mr Paul O'Faherty, chairman of the Irish Association of Pension Funds, said.
The self-employed will also have the option of retaining ownership of the capital sum invested on retirement to provide a retirement income. They can also retain ownership of the market value of the accumulating fund during the contribution period.
The Minister said there would be consultations with the Pensions Board and other expert bodies prior to finalising proposals for the Finance Bill.
Mr Alan Broxson of leading pensions consultancy Mercer/Irish Pensions Trust said the proposed changes were positive but he warned that there was a danger that people would invest their pensions badly. "We will wait for the detail, as we would expect some limits to be imposed on it in the Finance Bill," he said.
Ms Ann Maher, chief executive of the Pensions Board, said it looked forward to working with the Minister's officials and other experts on the practical difficulties involved. Security would be an important issue in deciding how self-employed pensions could be invested as no one could tell how long they would live but it was crucial that people had an income.
Mr McCreevy also announced that the limits on tax-relieved contributions would be increased from 15 per cent to 30 per cent on a sliding scale relating to age. The move, which will cost £18 million in a full year, was widely welcomed as recognising that self-employed people often begin to plan for their retirement later in life, having spent their early years building up a business.
"This is a very positive move in light of the National Pensions Policy Initiative and the perceived need to encourage individuals to provide for their retirement," said Mr Mike Kemp, chief executive of the Irish Insurance Federation.
In the context of the increased contribution limits, the Minister said it would be necessary to examine the question of an earnings ceiling.