Dáil Éireann Debate, Wednesday - 21 March 2012
88 Deputy Noel Harrington asked the Minister for Finance if he intends to amend the pensions acts regarding those who may seek relief to withdraw part of their pension contributions to assist them when they are in financial difficulties; and if he will make a statement on the matter. [15700/12]
View answerThere are a number of reasons why, under existing policies, early withdrawals of pension savings are not permitted, the principal one being that pension schemes and plans (and the associated tax reliefs) are designed as long term savings vehicles based on the principle that the savings will be "locked away" until retirement. Otherwise, there would be little reason to treat pension savings more favourably from a tax point of view than other general savings. A number of proposals have been made that individuals should be allowed access to their pension savings prior to retirement. Various rationales have been advanced to justify these proposals including that such access would allow those individuals to pay down mortgage and other debt and would otherwise provide a boost to economic activity.
This is not a simple matter. During 2011, at the request of the Government's Economic Management Council (EMC), an Ad hoc group was established under the chairmanship of the Department of Social Protection to consider the idea of allowing people to access their pension savings before pension age in order to assist them in paying down debt. The ad hoc group presented a detailed report to the EMC in September. The conclusions of the Ad hoc Group report were that:
There is no evidence that the group likely to be most affected by mortgage debt (or other debt) has access to sufficient pensions savings to make a difference to their situation.
The legislative and administrative implications for such a scheme would be extremely complex and would appear excessive given the overall impact.
Longer term difficulties whereby people are not making adequate provision for their retirement would be exacerbated, with potential for increased demands on the State.
Individuals cashing in their pension savings now would get poor value in current circumstances which they would struggle to replace in the future.
The "Keane Group" on mortgage arrears did not dispute these findings and early access to pension savings did not feature among the recommendations of that Group.
A more general scheme of early access to pension savings would present significant problems in terms of the proper targeting of the use of accessed funds and controls over potential abuse.
The tax treatment of pension savings is only one aspect of the broad policy of encouraging people to provide for an adequate income in retirement beyond the basic State pension. This policy area is the responsibility of my colleague, the Minister for Social Protection, who I know is also aware of the proposals being made for early access to pension savings. I understand that the Minister for Social Protection intends to have a short and focused independent review carried out of broad pension policy in her Department. I have written to her asking that the issue of early access to pension savings be considered as part of that review.
