Gerry Reynolds
Question:182 Mr. G. Reynolds asked the Minister for Finance if a person (details supplied) in County Sligo is entitled to make AVC contributions at the rate of 30% of salary. [5453/02]
Written Answers. - Tax Code.
An employee's contributions to a Revenue approved occupational pension scheme are tax deductible at the marginal income tax rate. The maximum pension payable to an employee on retirement under Revenue rules is two thirds of final salary. However, not all schemes provide for the maximum approvable pension. In these cases, an employee may pay "additional voluntary contributions", AVCs, in order to provide extra retirement benefits up to the Revenue approvable maximum. At present, the aggregate of tax relievable contributions to the main scheme and the AVC scheme may not exceed 15% of salary. In order to encourage employees to increase their level of pension cover, I propose to increase the tax relieved limits so that they will range from 15% to 30% of salary depending on age. These proposed new age related limits also apply to premiums paid to retirement annuity contracts, RACs, and are as follows:
|
Age |
Limits |
|
Up to 30 years of age |
15% of Schedule E earnings |
|
30 up to 40 years of age |
20% of Schedule E earnings |
|
40 up to 50 years of age |
25% of Schedule E earnings |
|
50 years plus |
30% of Schedule E earnings |
The new rules will not come into effect until the 2002 Finance Act has been passed by the Oireachtas. The Act is due to be passed at the latest on 5 April 2002. This means that, until then, the current 15% limit will apply. On the passing of the Act, the person in County Sligo should contact their local inspector of taxes giving details of their pension and AVC schemes to ensure that the funding limits will not prevent that person paying the maximum age related contribution.