Wednesday, 2 October 2013

Questions (107, 108, 109, 110, 111, 112)

Michael McGrath

Question:

107. Deputy Michael McGrath asked the Minister for Finance the additional income tax payable by a single person earning €60,000 who makes a pension contribution of 10% of gross salary if pension tax relief was restricted to 30%; and if he will make a statement on the matter. [41346/13]

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Michael McGrath

Question:

108. Deputy Michael McGrath asked the Minister for Finance the additional income tax payable by a single person earning €70,000 who makes a pension contribution of 10% of gross salary if pension tax relief was restricted to 30%; and if he will make a statement on the matter. [41347/13]

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Michael McGrath

Question:

109. Deputy Michael McGrath asked the Minister for Finance the additional income tax payable by a single person earning €80,000 who makes a pension contribution of 10% of gross salary if pension tax relief was restricted to 30%; and if he will make a statement on the matter. [41348/13]

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Michael McGrath

Question:

110. Deputy Michael McGrath asked the Minister for Finance the additional income tax payable by a single person earning €100,000 who makes a pension contribution of 10% of gross salary if pension tax relief was restricted to 30%; and if he will make a statement on the matter. [41349/13]

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Michael McGrath

Question:

111. Deputy Michael McGrath asked the Minister for Finance the additional income tax payable by a single person earning €80,000 who makes a pension contribution of 10% of gross salary if pension tax relief was restricted to 30% and the earnings cap for pensions contributions was reduced to €70,000; and if he will make a statement on the matter. [41350/13]

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Michael McGrath

Question:

112. Deputy Michael McGrath asked the Minister for Finance the additional income tax payable by a single person earning €100,000 who makes a pension contribution of 10% of gross salary if pension tax relief was restricted to 30% and the earnings cap for pensions contributions was reduced to €70,000; and if he will make a statement on the matter. [41351/13]

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Written answers (Question to Finance)

I propose to take Questions Nos. 107 to 112, inclusive, together.

At the outset, it is important to note that the maximum annual amount of tax-relieved pension contributions that an individual can contribute to their pension arrangements is restricted to an age-related percentage limit of remuneration and is further subject to an overall earnings cap, which currently stands at €115,000. In essence, an individual can make tax relievable pension contributions up to the lower of the relevant age-related percentage of their actual remuneration and the relevant age related percentage of €115,000. The age related percentage limits are set out in Table 1 below.

Table 1

Up to age 30

15% of remuneration

30 to 39

20%

40 to 49

25%

50 to 54

30%

55 to 59

35%

60 and over

40%

In the first four questions, both the level of earnings stipulated, ranging from €60,000 to €100,000, and the level of contribution at 10% of gross earnings in all cases, are lower than both the age-related percentage limit (at all ages) and the earnings limit referred to above. The additional income tax that would be payable by single persons in those circumstances if tax relief was reduced from 41% to 30% is set out in the following table.

Table 2

Gross Earnings

Pension Contribution at 10%

Income Tax Relief @ 41%

Income Tax Relief @ 30%

Additional Income tax Payable

€60,000

€6,000

€2,460

€1,800

€660

€70,000

€7,000

€2,870

€2,100

€770

€80,000

€8,000

€3,280

€2,400

€880

€100,000

€10,000

€4,100

€3,000

€1,100

In the last two questions, the scenarios outlined are ones where, in addition to a reduction in the rate of tax relief on pension contributions from 41% to 30%, the earnings limit is reduced from €115,000 to €70,000. As indicated earlier, individuals can make tax-relievable pension contributions up to the lower of the relevant age-related percentage of their actual remuneration and the relevant age-related percentage of the earnings limit. In both of these scenarios, for the individuals concerned, notwithstanding that the earnings limit at €70,000 is below their gross annual earnings, the rate of contribution at 10% of their gross earnings leaves them unaffected by the change. In other words, as the following table illustrates, a pension contribution of 10% of €80,000. i.e. €8,000, is less than the maximum contribution allowed by the age-related percentage of the proposed lower earnings limit of €70,000, at all ages. The same holds for a contribution of 10% of gross earnings of €100,000. In the particular scenarios outlined in the questions, therefore, no additional income tax would be payable as a result of the reduction in the earnings limit over and above that outlined in Table 2.

Table 3

Age

Percentage contribution Limit

Earnings Limit

Maximum Tax-relievable Contribution

Up to age 30

15% of remuneration

€70,000

€10,500

30 to 39

20%

€70,000

€14,000

40 to 49

25%

€70,000

€17,500

50 to 54

30%

€70,000

€21,000

55 to 59

35%

€70,000

€24,500

60 and over

40%

€70,000

€28,000