Dáil Éireann Debate, Thursday - 24 September 2015
101. Deputy Michael McGrath asked the Minister for Finance the number of persons who have been granted a personal increase in the standard fund threshold applying to their pensions, in each year since 2011; the cumulative increase represented by these cases; the estimated amount of tax foregone as a result; and if he will make a statement on the matter. [32642/15]
View answerI take it that the Deputy is referring to the facility available under the Standard Fund Threshold (SFT) regime whereby individuals can seek a Personal Fund Threshold (PFT) in certain circumstances.
The Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement for tax purposes. Its purpose is to discourage over-funding and over-accrual of pension benefits through tax-relieved and tax-subsidised arrangements. The regime achieves this by imposing a significant tax charge on the value of retirement benefits above set limits when they are drawn down.
When the SFT limit was reduced in Budget and Finance Act 2011 to a level of €2.3 million, with effect from 7 December 2010, and was further reduced in Budget and Finance (No. 2) Act 2013 to €2 million, with effect from 1 January 2014, the clear legal advice to the Government (as at the time of the original introduction of the regime in 2005) was that an individual who had pension rights in excess of the SFT limit at the relevant dates was entitled to protect or "grandfather" those rights. Accordingly, the legislation provided that such individuals could protect their higher pension values, subject to certain ceilings and conditions, by applying to the Revenue Commissioners for a PFT certificate.
The Deputy is seeking to establish the cumulative level of protection afforded and the estimated tax foregone resulting from the grandfathering arrangements outlined above. The concept of "tax foregone" is arguably more applicable in the context of tax reliefs where there is a choice as to whether to pursue the particular policy stance or not. In that regard, it is important to note that these grandfathering arrangements were not considered optional and were provided in the legislation following legal advice to that effect from the Attorney General. In other words, introducing the SFT regime required the simultaneous protection of pension rights that had been built up legitimately by individuals under the tax provisions that applied up to the relevant dates. This was the firm legal advice to the Government when the SFT was introduced and on each subsequent occasion that the SFT limit was reduced. The choice, therefore, was to introduce the SFT regime, with grandfathering, or not at all.
I am informed by the Revenue Commissioners that, according to their records, since 7 December 2010, when the SFT was reduced to €2.3 million, they have issued 941 PFT certificates with a value of some €2,975 million. Since 1 January 2014, when the SFT was further reduced to €2 million, Revenue has to date issued a further 651 PFT certificates with a total value of some €1,441 million. The combined overall value of PFT certificates issued since 7 December 2010 is, therefore, €4,416 million. The cumulative additional value of pension benefits protected as compared with the SFT limits applying at 7 December 2010 and 1 January 2014, respectively is, therefore, some €950 million.
