Dáil Éireann Debate, Wednesday - 14 November 2012
110. Deputy Aengus Ó Snodaigh asked the Minister for Finance the position regarding the programme for Government commitment and national pensions framework proposal to reduce tax reliefs on private pensions in view of comments (details supplied) that the reliefs will not be reduced but instead a cap introduced and if he will elaborate on those comments. [49832/12]
View answerI assume the Deputy is referring to the commitment in the Government’s Programme to cap taxpayers’ subsidies for future pension schemes that deliver income in retirement of more than €60,000. The maximum allowable pension fund at retirement for tax purposes (the Standard Fund Threshold) has already been significantly reduced in Budget and Finance Act 2011 from over €5.4 million to €2.3 million while the annual earnings cap which operates in conjunction with age-related percentage limits to determine the annual amount of tax-relievable contributions that can be made by an employee or individual to pension savings has been reduced from over €275,000 in 2008 to its current level of €115,000 per annum. The level and design of these thresholds and caps are, for example, among the range of issues for consideration relevant to achieving the commitment referred to. The National Pensions Framework, which was published by the previous Government in March 2010, included among other things, proposals to introduce a new pension system involving auto-enrolment for employees without supplementary pension coverage. The system proposed in the Framework would be introduced when the prevailing economic circumstances allowed. The Framework proposed the introduction of a State contribution equivalent to 33% tax relief in respect of employees covered by auto-enrolment. This equivalent relief would also replace the current standard and marginal rates of tax relief for existing contributors to pension saving. I would expect that the report of the independent review of long term pension policy in Ireland, currently being conducted by the OECD on behalf of the Minister for Social Protection, may also deal with the issue of an auto-enrolment pension system.
The debate around the incentive regime for pension saving has tended to focus either on a further reduction in the maximum allowable pension fund for tax purposes at retirement or on a reduction in the rate of tax relief on pension contributions. These approaches are not, of course, mutually exclusive. In my 2012 Budget speech in December last, I said that I did not propose to make changes to the existing marginal rate relief at that time but that the incentive regime for supplementary pension provision will have to be reformed to make the system sustainable and more equitable over the long term. I said that my Department and the Revenue Commissioners would work with the various stakeholders in the next year to develop workable solutions. On foot of this, a broad informal consultation was undertaken this year across a spectrum of stakeholders in the pensions sector to establish their views on further changes to the incentive regime for pension saving.
I will give due consideration to the views of all interested parties in the pensions sector in the context of any proposals I may make to Government regarding the incentive regime for pension saving.
