Pearse Doherty
Question:84. Deputy Pearse Doherty asked the Minister for Finance the revenue that was generated when the standard fund threshold was reduced from €5 million to €2.3 million in 2010. [29499/15]
View answerWednesday, 15 July 2015
Questions (84, 85, 87)
Pearse Doherty
Question:85. Deputy Pearse Doherty asked the Minister for Finance the revenue that would be generated by disallowing tax relief for pensions when a standard fund threshold of €1.3 million is exceeded by a person. [29500/15]
View answerPearse Doherty
Question:87. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No.114 of 24 June 2015, in which he estimated that a reduction in the standard fund threshold to €2 million and the increase in the current single factor of 20 would raise €120 million in 2014, the expected yield if the standard fund threshold was reduced to €1.5 million, and the current single factor of 20 used to value the defined benefit pensions for the standard fund threshold increased factors by 20%, varying with age. [29502/15]
View answerWritten answers
I propose to take Questions Nos. 84, 85 and 87 together.
The Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement for tax purposes which was introduced in Budget and Finance Act 2006 to prevent over-funding of pensions through tax-relieved arrangements. The threshold was initially set at €5 million, which was subsequently reduced to €2.3 million in 2010 and further reduced in Budget 2014 and Finance (No 2) Act 2013 to €2 million with effect from 1 January 2014.
The full year yield from the reduction in the SFT to €2.3 million with effect from 7 December 2010 was estimated at the time of the change at €20 million.
Information on the numbers and values of individual pension funds or on individual accrued benefits in pension schemes are not generally required to be supplied to either the Revenue Commissioners or to my Department by the administrators of pension schemes and personal pension arrangements. The estimate of the yield of €120 million in 2014 and in a full year arising from the changes to the SFT regime introduced in Finance (No 2) Act 2013 was arrived at following considerable internal work over a period by my Department involving, among other things, data gathering and consultation with private sector sources relating to the specific changes to be made. There is no readily available underlying data or methodology on which to base reliable estimates of the savings that would arise from further changes to the SFT of the scale envisaged in the questions.
I would also like to clarify some points arising from the questions raised. 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 accumulation through contributions of large pension funds in the first place or unwinding the tax advantage of such overfunding by way of the higher effective tax charge.
Finally, the valuation factors to be used for establishing the capital value of defined benefit pension rights at the point of retirement for SFT purposes, and which accrue after 1 January 2014, were changed by Finance (No 2) Act 2013 from the previous single factor of 20 to a range of higher age-related valuation factors that vary with the individual's age at the point at which the pension rights are drawn down. The higher factors range from 37 for defined benefit pension entitlements drawn down at age 50 or under to a factor of 22 for pensions drawn down at age 70 or over.