Dáil Éireann Debate, Tuesday - 29 April 2025
555. Deputy Brian Brennan asked the Minister for Finance if he will consider increasing the €115,000 annual earnings cap for pension contribution tax relief in line with inflation and wage growth since its introduction in 2011, to ensure that workers can adequately save for their retirement. [18768/25]
View answer556. Deputy Brian Brennan asked the Minister for Finance if he will review the recommendations from a report (details supplied) on pensions, particularly the proposal to remove the annual pension contribution limits, including the €115,000 earnings cap; and to outline the Government's position on this matter. [18769/25]
View answer557. Deputy Brian Brennan asked the Minister for Finance if he will consider allowing retrospective pension contributions for individuals who were unable to maximise their tax-relieved contributions in previous years due to the €115,000 earnings cap. [18770/25]
View answer558. Deputy Brian Brennan asked the Minister for Finance if he will consider aligning the €115,000 earnings cap for pension contributions with the standard fund threshold, which is set to increase incrementally to €2.8 million by 2029, in order to provide greater flexibility for retirement savings. [18771/25]
View answerI propose to take Questions Nos. 555, 556, 557 and 558 together.
Tax relief for individuals is granted at the marginal rate of income tax. The amount of contributions on which relief can be granted in a tax year is limited to an age-related percentage of the individual’s earnings, ranging from 15% for individuals aged under 30 years to 40% for individuals aged 60 years and over, and subject to an overall annual earnings’ cap of €115,000. The age-related percentage limits are set out below.
|
Up to age 30 |
15% of remuneration |
|
30 to 39 |
20% |
|
40 to 49 |
25% |
|
50 to 54 |
30% |
|
55 to 59 |
35% |
|
60 and over |
40% |
The annual earnings cap of €115,000 operates to limit the level of tax-relieved pension contributions made by an individual or on behalf of an employee in any one year. The annual earnings cap acts, in conjunction with age-related percentage limits of annual earnings, to put a ceiling on the annual amount of tax relief an individual taxpayer can obtain on pension contributions. Its primary purpose is to protect the Exchequer from large variations in contributions profiles over time, while also placing limits on the overall level of Exchequer support provided for supplementary pensions. The Deputy asks if I will consider increasing the annual earnings cap. The Deputy will appreciate that there could be significant cost in making any changes to the earnings cap and this must be balanced against other competing demands, and considered as part of the annual Budget and Finance Bill process.
Regarding aligning the earnings limit with the Standard Fund Threshold (SFT), while they both serve complimentary roles within the pension tax system, they are separate and currently there is no relationship between the level of the SFT and the relevant earnings cap. The 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, whilst the earnings cap limits the amount of tax-relieved contributions that an individual or an employee can make towards pension savings in any one year. I have no plans at this time to align the earnings limit with the SFT, but as is the case with all taxation, the tax treatment of pensions is kept under ongoing review.
Regarding the Deputy question in respect of allowing retrospective pension contributions, an individual’s contributions in excess of the maximum tax-relieved amount can be treated as contributions for the previous year (if the individual did not fully utilise their tax relieved amount in that year) if the contribution is made before the return filing date for that year.
For example, if an individual’s maximum tax relieved contribution in 2025 is €7,500, but they make contributions of €10,000, the excess over €7,500 can be treated as a contribution for 2024 if it is made before the filing date for the 2024 tax return, which is 31 October 2025 or mid-November if the return is filed through Revenue’s Online Service (ROS). Any unrelieved balance can be carried forward to claim relief in a future year.
This is set out in legislation in Part 30 of the Taxes Consolidation Act 1997 in section 774 for occupational pension schemes, in section 787 for Retirement Annuity Contracts (RACs), in section 787C for Personal Retirement Savings Accounts (PRSAs) and in section 787X for Pan-European Pension products (PEPPs).
With the exception of the election to have a contribution deemed to be taken in the previous year, it is not possible under the current legislative provisions to allow retrospective pension contributions by individuals back over prior tax years. I do not currently intend to make changes to the rules regarding retrospective contributions.
As the Deputy is aware, Dr de Buitléir’s report on his examination of the Standard Fund Threshold (SFT) was published in September 2024 and made a number of recommendations across the SFT regime and the wider pension tax system, including a recommendation to remove the annual earnings limit. My Department’s focus to date has been on the recommendations relating directly to the SFT, and the recommendations relating to pension contributions remain under consideration by my Department.
