Dáil Éireann Debate, Tuesday - 16 July 2013
267. Deputy Pearse Doherty asked the Minister for Finance the revenue that could be raised for the Exchequer with the Standard Fund Threshold for pensions reduced to the amount proposed by budget 2013; the income ceiling link for pension tax reliefs reduced to €70,000 per annum, and the tax relief for pension contributions standardised. [34782/13]
View answerIn Budget 2013, I announced that changes to the maximum allowable pension fund at retirement for tax purposes (the Standard Fund Threshold - SFT) and other possible changes to give effect to the commitment in the Programme for Government to cap taxpayers’ subsidies for pension schemes which deliver pension income of more than €60,000 will be put in place in 2014. A figure of €250 million was included in the Budget 2013 arithmetic for this measure and was, as clearly stated in the Budget 2013 documentation, a provisional figure pending further detailed analysis of the changes necessary to give effect to the Programme for Government commitment. That analysis is ongoing and involves consideration of changes to the SFT as well as other potential alternative changes relating to the treatment of supplementary pension arrangements.
As regards the proposal to have the income ceiling link for pension tax reliefs reduced to €70,000 per annum, I assume that the Deputy is referring to the current annual earnings cap of €115,000 which operates to limit the level of tax-relieved personal pension contributions in any one year. The annual earnings cap acts, in conjunction with age-related percentage limits of annual earnings, to put a ceiling on the annual amount of tax relief an individual taxpayer can obtain on pension contributions.
A breakdown of the cost of tax relief on employee contributions to occupational pension schemes is not available by income tax rate, as tax returns by employers to the Revenue Commissioners of employee contributions to such schemes are aggregated at employer level. An historical breakdown is available by tax rate of the tax relief claimed on contributions to personal pension plans — Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) — by the self-employed and others, to the extent that the contributions have been included in the personal tax returns of those taxpayers.
There is, therefore, only a limited statistical basis for providing definitive figures. However, by making certain assumptions about the available information, the Revenue Commissioners inform me that the combined estimated full year yield to the Exchequer from reducing the current annual earnings cap of €115,000 to €70,000 and confining tax relief to the standard rate of 20% in respect of individual contributions to occupational pension schemes, RACs and PRSAs would be about €555 million.
