Dáil Éireann Debate, Wednesday - 24 June 2015
114. Deputy Peadar Tóibín asked the Minister for Finance if the pension provisions of budget 2013 pertaining to contributions no longer receiving tax relief once the pension fund has exceeded the standard fund threshold has been enacted; if so, the amount the measures have generated, or if recently enacted, what they are planned to generate. [25289/15]
View answerI introduced changes in Finance (No. 2) Act 2013 to deliver on the commitment I made in Budget 2013 in the supplementary pensions area. The changes involve a reduction from 1 January 2014 in the value of the maximum allowable pension fund at retirement for tax purposes (the Standard Fund Threshold, SFT) from €2.3 million to €2 million and an increase from the current single factor of 20 used to value Defined Benefit pensions for SFT purposes to a range of higher factors varying with the age at which the pension is drawn down. This latter change places a higher capital value for SFT purposes on Defined Benefit pension entitlements accrued after 1 January 2014 and drawn down at retirement. The use of a range of capitalisation factors will improve the equity of the SFT regime as between Defined Contribution and Defined Benefit pension arrangements and between those retiring at earlier ages and those retiring at older ages.
The Deputy might note that the SFT regime does not involve the non-application of tax relief to pension contributions. Instead, the regime addresses the problem of pension overfunding and excessive pension accrual by imposing a much higher effective tax charge on the value of retirement benefits above set limits when they are drawn down, thus discouraging the building up through contributions of large pension funds in the first place or unwinding the tax advantage of such overfunding.
The yield from the changes made to the SFT regime is estimated at €120 million in 2014 and in a full year.
