Dáil Éireann Debate, Tuesday - 23 March 2004
17 Mr. Cuffe asked the Minister for Finance his views on the contention expressed in the recent publication by the Economic and Social Research Institute, Reforming Pensions in Europe, that tax foregone in reliefs given to encourage private pension provisions now exceed the payment of means tested old age pensions. [8974/04]
View answerA recent publication 'Reforming Pensions in Europe' launched at the ESRI deals with a range of pension issues arising in different EU countries. In one of the chapters it is stated that in Ireland, the UK and the US, tax reliefs for private pensions cost more than means-tested pensions. In Ireland, the tax system is used to encourage private pension provision, that is, occupational pension schemes and personal pensions. Tax relief is available for contributions made by the employer, employee or self-employed. Furthermore, the income and gains during the funding period are exempt. However, as a quid pro quo for these reliefs, tax arises when the income is withdrawn from the pension fund in retirement.
The total very tentatively estimated cost of tax relief for pension funding is €2,600 million for the year 2000-1 which is the latest year available. This covers tax relief on contributions by employers, employees and self employed and the exemption from income and gains in the fund. There is very little concrete information in respect of contributions to occupational pension schemes as the relief is effectively given through the payroll system. In this regard, I provided in the Finance Bill 2004 that from February 2005 an employer will be obliged to show the overall amount of employer and employee contributions in the end of year P35 return.
Expenditure on means tested social welfare pensions is estimated at €720 million in 2004. It is Government policy to encourage pension provisions through tax relief as well as through the PRSI system and payment of non-contributory pensions.
