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Tax Reliefs Eligibility

Dáil Éireann Debate, Thursday - 7 November 2013

Thursday, 7 November 2013

Questions (79, 82)

Michael McGrath

Question:

79. Deputy Michael McGrath asked the Minister for Finance the number of taxpayers that will be impacted in 2014 by restriction on tax relief on contributions to large pension pots outlined in budget 2014; and if he will make a statement on the matter. [47611/13]

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Michael McGrath

Question:

82. Deputy Michael McGrath asked the Minister for Finance the way he will ensure that the restriction on tax relief on contributions to large pension pots will apply equally to workers in the public and private sector; and if he will make a statement on the matter. [47614/13]

View answer

Written answers

I propose to take Questions Nos. 79 and 82 together.

It is difficult to be definitive about the number of individuals that may be affected by the changes to the Standard Fund Threshold (SFT) regime. Among other reasons, this is because the changes are likely to have both direct impacts and indirect behavioural impacts. The direct impacts will be on individuals whose pension savings or entitlements will be in excess of the reduced SFT on 1 January 2014 (and who may seek a Personal Fund Threshold (PFT)) and those whose pension savings or entitlements may be below the threshold on that date but, with future contributions or accruals, may exceed the threshold in time. For both of these groups where the SFT or PFT is exceeded at the point of retirement, chargeable excess tax will arise. However, the changes are also likely to mean that individuals (generally in the private sector) who may otherwise be affected by the amendments to the SFT, and who have the flexibility to do so, may change behaviour and opt out of additional pension saving or pension accrual, in circumstances where they can obtain compensatory payments from their employer, in order to avoid breaching the SFT or their PFT. Overall, the changes could potentially impact, both directly and indirectly, on up to 10,000 individuals in the short to medium term.

The changes to the SFT regime apply, as appropriate, to both defined benefit (DB) and defined contribution (DC) pension arrangements in both the private and public sectors. As regards DB pension arrangements, it is irrelevant whether an individual is a higher paid civil servant, a Minister or a highly paid member of a private sector DB scheme, the same SFT rules apply to all such arrangements.

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