E.U. EARLY RETIREMENT SCHEME

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Who is eligible?
Farmers, or their spouses aged between 55 and 66 years of age, who have been engaged in full time farming for the previous 10 years.

What is the definition of a full time farmer?
Farmers who earn more than 50% of their income from farming and spend more than 50% of their time on the farm. If the farmer had worked full time off the farm and the spouse/partner had not, the spouse can apply provided he/she is within the age category and has been involved in a managerial capacity on the farm.
In the case of off-farm income exceeding 50% of the overall income in any of the 10 preceding years the farmer is ineligible. In the case of a marginal difference a farmer may choose to opt for the income tax or the notional farm income assessment method (Teagasc Farm Income Data), which may be more favourable. However, whichever system is chosen, it must be applied in each year.

Is income from FÁS and Small Holders Assistance counted as off-farm income?
No. Both are now treated as income neutral. In the case of FÁS schemes this has recently been clarified to IFA.

How long does the pension last?
For 10 years but it is not payable beyond the 70th year.

Is it beneficial for a younger spouse to apply?
Yes, because it will increase the length of time the pension is payable.

Can the farmer transfer to spouse and qualify for pension?
Yes, provided the spouse is less than 50 years of age, and practises farming as a full-time occupation and meets the enlargement clause.

What is the level of enlargement?
A minimum of 5 hectares (12.5 acres) or 10% of the enlargement is achieved after transfer.

How can enlargement be achieved?
If the transferee has no land, he/she must acquire 5 ha before a transfer under the scheme. If acquired after a transfer under the scheme the enlargement must be a minimum of 5 ha. or 10%, whichever is the greater.

Can enlargement be achieved through giving a son or daughter part of the holding?
No, unless the land was transferred pre-July 1992.
However, in certain circumstances depending on how the tenure of the land is held, it may be possible to achieve enlargement from within the holding. If for example the spouse had land in his / her, name this can be passed on to son or daughter with the remaining land of the farmer being used to retire.

Will the enlargement Clause be abolished?
Under the EU Agenda 2000 proposals it is proposed that the enlargement criteria will be replaced by an economic viability clause. IFA had sought the abolition of the enlargement clause and will be endeavouring to ensure that the new viability clause is flexible to allow most farmers avail of a new and improved retirement scheme which the organisation will be pressing for strongly under the negotiations.

What minimum amount of land must a farmer have to retire?
5 hectares.

What is the maximum amount on which a pension can be payable?
24 hectares (59.3 acres).

How is the pension calculated?
A basic payment of £4,006 plus £101.34 per acre. Maximum pension £10,016.

When is the pension payable?
Once approved by the Department of Agriculture, monthly payments normally commence on the last day of each month.

Is the pension taxable?
Yes.

What about PRSI?
If the farmer is less than 66, it is strongly advised that voluntary contributions of PRSI continue, in order to maintain the social insurance record of the farmer. The farmer should contact the Department of Social Welfare about voluntary contributions.

Is the retired farmer eligible for State pension when he/she reaches 66?
Yes. The farmer will qualify for the contributory old age pension if sufficient PRSI contributions have been made. In the case of the non-contributory pension the income of the ERS is disregarded in the means test assessment. However, if there is lease income this is taken into account in the means test for non-contributory pension.

Does the farmer get the ERS on top of the State pension?
No. The ERS pension on reaching 66 years of age is reduced by the amount that the farmer and their spouse/partner in joint management receive.

What happens if the recipient of the pension dies?
The pension, in full or part, may be transferred to a dependent surviving spouse or dependent children for the remaining pension period subject to the total annual income not exceeding the maximum of the pension and the average industrial wage combined (approximately £26,400).

Can a widow's pension be paid on top of the Early Retirement Scheme?
Yes. Until the person reaches the age of 66 the widow's pension is paid on top of the ERS. If the application to the scheme was made before July 1997, or if the person was in receipt of a widow/widowers pension before that date, then that pension will not be deducted from the ERS.

Can the retired farmer carry on farm work after retiring?
A retired farmer must agree to cease all commercial farming activity. A farmer may not engage in contracting, work for other farmers, or buy or sell cattle. A farmer can take a passing interest in the farm but he cannot contribute his labour to the farm.

What are the responsibilities of the transferee?
An eligible transferee must practice farming as a main occupation on the holding for at least 5 years or for as long as the pension is payable.

Is there an age limit for the Transferees?
Yes. Between the ages of 18 and 50 years of age.

Are there educational requirements?
Only if the farmer is born after 1st January 1968. The requirement is a 150 hour Teagasc educational training course.

Can Land be transferred to non-eligible transferees?
Yes. Provided the transfer is carried out prior to the main holding being put into the scheme. However this issue is currently under review.

Can a transferee qualify more than one farmer for the pension?
Yes. Provided all conditions are met and the full holding cross-qualifying the applicants is declared.

Can a holding be split among several transferees?
Yes. Provided all the conditions are met and that on the day that all the transfer documents are signed each of the transferees was "landed" in their own right.

Does quota have to be transferred?
Yes. Unless the transferee does not want them.

Is there a claw back for lease/sale of quota (unused rule)?
In the case of milk quota/land transactions on or after the 10th of April 1998, there is a 20% clawback. For suckler cows and sheep quota there is no clawback.

Who should I consult when applying for the ERS?
Due to the complex nature of the scheme, and in particular the legal consequences, legal advice is essential particularly in regard to conveyancy. Solicitors should now have a fair knowledge of the scheme. It is advisable to ask neighbouring farmers who have joined the scheme, about their experiences and any pitfalls.

Who do you apply to?
The local Farm Development Service office of the Department of Agriculture.

What should accompany the application?
Make sure that in the case of transfers you have a stamped deed of transfer, and an up-to-date certified copy folio(s) and map(s) of land(s) transferred. In the case of leases, the lease must be stamped by the Revenue Commissioners and have Section 12 Land Commission Consent.

Do lease prices have to be at market value?
Yes. Otherwise there may be be capital acquisition tax and stamp duty implications.

What mechanisims should I use to transfer the farm?
A farm can be transferred by gift, deed or lease. In the case of a lease, the AIB/IFA masterlease should be of major help in this regard.

How long will the ERS last?
It should last until 1999. Under the Agenda 2000 Proposals there are specific proposals to continue the measure after this date with greater flexibility, and an increase maximum pension of approximately £12,700. However this is subject to negotiation at both European and National level.

Are there concessions for farmers to lease their farm?
Yes. A tax exemption of £4,000 for 5 year leases, and £6,000 for 7 year leases, applies where the lease applies to non-related people.