Dáil Éireann Debate, Tuesday - 30 April 2024
247. Deputy Seán Haughey asked the Minister for Finance if he will allow householders to withdraw money from their personal pension funds in order to carry out retrofitting and insulation works to their homes without having to incur a tax obligation; if he will consult with the Minister for the Environment, Climate and Communications on this proposal; and if he will make a statement on the matter. [19408/24]
View answerOverall, the policy objective for tax relief on pension contributions is to encourage individuals to save for retirement; to help meet a targeted level of supplementary pension coverage and income replacement; and to assist in preventing an over-reliance on State support for citizens in later life. Accordingly, pensions already have their own special treatment within the tax system to encourage these preparations - an Exempt, Exempt, Tax (EET) system. Contributions to pensions (within certain limits) are exempted from income tax, pension fund gains are exempted from income tax, and income from pension drawdown is taxed other than a tax free lump sum. This can be seen as a form of tax deferral which is intended to encourage individuals to save appropriately for retirement.
The Deputy is asking whether early drawdown of pension funds is allowed in certain circumstances, in order to carry out retrofitting and insulation works to their homes. There are a number of reasons why pre-retirement access to pension savings is not permitted on a general basis. Any early drawdowns from a pension fund, for any purpose, would reduce the pension savings from which individuals could provide for their retirement, with smaller pension schemes losing a larger proportion of their overall savings. In addition, it should be noted that pensions are taxed on drawdown with the exception of a tax free lump sum, and withdrawing money without incurring a tax liability would in fact not align with the EET approach.
As introduction of a scheme to allow early access to funds would not be in alignment with the goal of supporting savings for retirement and could undermine the integrity of the EET regime. Therefore, I do not currently have any plans to allow pension savers to access their funds tax free before retirement. However, as with all taxation, the rules regarding pensions are kept under ongoing review and I am of course open to engaging with my Ministerial colleagues on any proposals they may have in the context of the annual budgetary cycle, taking into account the Guidelines for Tax Expenditures prepared by my Department.
I would finally note that there are already a number of Government programmes in place to support retrofitting including schemes such as the National Home Energy Upgrade Scheme, the Better Energy Homes Grants as well as the Home Energy Upgrade Loan Scheme.
