Skip to main content
Normal View

Pension Provisions

Dáil Éireann Debate, Thursday - 27 June 2013

Thursday, 27 June 2013

Questions (140, 141)

Clare Daly

Question:

140. Deputy Clare Daly asked the Minister for Public Expenditure and Reform if it is his intention to abolish the pension-related deduction from 2014. [31325/13]

View answer

Clare Daly

Question:

141. Deputy Clare Daly asked the Minister for Public Expenditure and Reform the reason a front-line worker on €20,000 pays a pension-related deduction of 10% but a person on more than €60,000 pays only 10.5%, with the deduction being on gross salary, the higher the pay, significantly more relief from tax, pay-related social insurance and universal social charge, meaning effectively the lower paid worker paying more. [31327/13]

View answer

Written answers

I propose to take Questions Nos. 140 and 141 together.

Within the next few days, and in compliance with the duty placed on me by section 13 of the Financial Emergency Measures in the Public Interest Act 2009, I will lodge with both Houses of the Oireachtas my annual review and report on the public service Pension-related Deduction (PRD), which is the subject of the Deputy’s questions.

Without unduly anticipating the findings of that review and report, I can state that I do not plan to abolish the PRD from 2014. PRD remains a critical financial emergency measure, supporting the fiscal position to the extent of some €1 billion annually.

I would however note that, as lately legislated in the Financial Emergency Measures in the Public Interest Act 2013, and as provided for in the Haddington Road Agreement, the rate of PRD on the €15,000 to €20,000 band of pay received in a year will fall from 5% to 2.5% on 1 January 2014. This rate cut will be worth €125 annually in gross terms to most public servants, with those taxed at the standard rate enjoying the greater gain in terms of take-home pay boost.

This progressive aspect of the January 2014 PRD adjustment with respect to take-home pay is mirrored by the progressive design of the PRD itself. As an income-graduated measure applying to pensionable public servants, PRD is structured in such a way that increasing rates of deduction are applied to increasing bands or slices of an affected person’s pay each year. In this matrix of band and rates a zero per cent rate applies to the first €15,000 of earnings, which is especially important for lower-paid public service workers, in that it markedly dampens the proportion of pay deducted. In terms of its detailed composition, PRD is currently applied by reference to the following set of income bands and associated reduction rates:

First €15,000 of earnings: exempt

Earnings between €15,000 and €20,000: 5%

Earnings between €20,000 and €60,000: 10%

Earnings above €60,000: 10.5%

Based on this set of deduction rates, the PRD imposition on a public servant paid €20,000 in a year is €250, or 1.25% of pay, not 10% of pay as stated in the Deputy’s second question. Likewise, the PRD taken from a public servant paid €60,000 in a year is €4,250, or 7.08% of pay, not 10.5% as stated by the Deputy.

In terms of the actual outturns in the example cases raised by the Deputy, the large difference in PRD impact between 1.25% of pay at €20,000 and 7.08 % of pay at €60,000 shows how, across this pay gap, PRD acts in a manifestly progressive way. While this large difference would lessen in a post-tax relief analysis, the lower paid person would undoubtedly retain a clear edge.

For the record, PRD, though tax-relieved, does not qualify for relief from PRSI or USC. All such reliefs are a matter for the Minister for Finance.

Top
Share