Tuesday, 27 May 2014

Questions (78)

Brendan Griffin


78. Deputy Brendan Griffin asked the Minister for Finance if he will allow persons in private pensions to cash in their pensions without a tax liability if they invest in a start-up business; if he sees a merit in such a move; and if he will make a statement on the matter. [22127/14]

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Written answers (Question to Finance)

The tax treatment of pension savings in the State is one that is common across most other EU Member States and involves the broad exemption from tax on pension contributions paid into a pension scheme or fund and the exemption from tax of any investment growth in the pension fund, all on the understanding that the pension benefits will be subject to tax when paid out at retirement (with the exception of retirement lump sums which may be taken tax-free to a lifetime limit of €200,000).

The tax regime (and indeed the regulatory regime) governing the activities of supplementary or private pension provision are aimed at encouraging and also protecting the pension savings of individuals in order to allow them the opportunity to provide for an adequate income in retirement.

A major difficulty with the Deputy's proposal is that it carries the very significant risk that, if things go badly wrong, individuals will not only lose their investment in a new business but will also lose the pension savings which would otherwise have helped provide for their old age. The State, for its part, would not only lose the tax revenues it should otherwise receive on the pension benefits foregone but would also come under pressure to provide some form of safety net for affected individuals if it encouraged this type of business investment with individual pension savings through the tax system. I have no plans to introduce the measure being suggested.