Wednesday, 27 November 2013

Questions (54)

Billy Timmins


54. Deputy Billy Timmins asked the Minister for Finance further to Parliamentary Question No. 60 of 14 November 2013, if the measures announced in the 2014 budget differentiate between public sector pensions and those in the private sector. [51079/13]

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Written answers (Question to Finance)

I assume that the Deputy is referring to Parliamentary Question No. 60 of 20 November 2013. In that reply I gave information relating to the changes to the Standard Fund Threshold (SFT) regime announced in my 2014 Budget Statement and reflected in the recently published Finance (No. 2) Bill 2013. The changes to the SFT regime outlined in the reply referred to above apply, as appropriate, to all 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 public servant or a highly paid member of a private sector DB scheme, the same SFT rules apply to all such arrangements. The only area of difference relates to the reimbursement or recovery of chargeable excess tax by affected public servants to the pension fund administrator where the tax arises and is paid upfront by the administrator. This arises because, unlike affected individuals in the private sector who have the flexibility to take steps (and generally do) to prevent themselves breaching the SFT or Personal Fund Threshold (PFT) if they have one so that a tax charge does not arise, public servants cannot minimise or prevent the breaching of the SFT or PFT by ceasing contributions or benefit accrual.

Where the SFT or PFT is exceeded an immediate tax charge arises on the excess which can be significant. I should stress that this part of the legislation does not remove or reduce the tax liability arising on a chargeable excess in such cases but provides more flexible options for the recoupment to the pension fund administrator of the tax paid. These options involve effectively spreading the recovery of the tax, which has been paid upfront by the public sector pension administrator, from the affected individual over a longer period.