Vol. 483 No. 1
164 Mr. N. Ahern asked the Minister for Finance the categories of retired PAYE staff, if any, who have to pay 2.25 per cent PRSI; the way in which this is justified against retired people; the cost, if any, to the Exchequer if this was abolished; if his attention has been drawn to the anger this causes to retired people; and if he will remove this levy in the coming budget. [19787/97]
As regards the PRSI deduction on retired PAYE staff, this deduction refers to the health contribution and the employment and training levy (levies) as retired people are not liable to PRSI. The levies are charged at a rate of 2.25 per cent on a person's total income from all sources with only a few exceptions, e.g. social welfare payments, including social welfare pensions. Occupational pensions are, therefore, liable to the levies.
However, the 1994 budget introduced a low income exemption threshold for the levies of £173 per week of £9,000 per annum which means that where a person's income is lower than the threshold they are not liable to the levies. Prior to the 1994 budget the levies were applied to a person's income irrespective of the amount earned. The threshold figure of £173 per week, or £9,000 per annum, was selected on the basis that two thirds of the average industrial wage is a widely used international measure of low pay. Following this year's budget the threshold is now £197 per week or £10,250 per annum.
In relation to the cost of exempting pensioners from the levies, it is estimated that exempting all people aged 65 and over from the levies would cost around £25 million (data for pensioners on their own is not available). While the low income threshold will continue to be increased there are no plans to exempt occupational pensions from the levies. However, the overall tax burden on the elderly is of concern to the Government and will be borne in mind in the context of preparations for the forthcoming budget.
