Tuesday, 9 April 2019

Questions (151)

Jan O'Sullivan

Question:

151. Deputy Jan O'Sullivan asked the Minister for Finance the status of the probe carried out by the Revenue Commissioners into reports that cost of living increases due to those holding private pensions were not paid by some insurance companies under schemes, including those for which an annuity was paid and which required such cost of living increases to be paid to those pension holders; and if he will make a statement on the matter. [16195/19]

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Written answers (Question to Finance)

The legislation governing the tax treatment of pensions is contained in Part 30 of, and Schedules 23 to 23C to, the Taxes Consolidation Act 1997. In addition, the Revenue Pensions Manual gives general guidance on, among other things, how this legislation is to be applied.

Revenue rules in relation to “Increases of Pensions in Payment” are set out in Chapter 6.8 of the Revenue Pensions Manual. Guaranteed increases of a pension in payment may be made by using either of the following formulae-

- a fixed increase of not more than 3% per annum compound, or

- an increase linked to the Consumer Price Index, or another similar agreed index.

The purpose of these rules is to maintain the real value of pension payments and consequently these rules allow for the real value of pensions in payment to be maintained over the course of a pensioner’s lifetime. The rules in question have been in existence for over 30 years.

In 2018 reports emerged to the effect that some pension providers are not “paying out” on what are known as 5pc escalators (that is, a fixed yearly increase of 5% in the amount of pension payments) in cases where the increase had been paid for at the time the pension was purchased.

I am informed that Revenue has made enquiries into this matter and can confirm there are 1,080 such policies in existence of which 160 policies are currently being restricted and additional policies may be restricted in future. Revenue is engaging with the insurance industry in relation to this matter and will meet the representative body, Insurance Ireland, later in April where this matter will be raised.