Thursday, 8 March 2018

Ceisteanna (611)

John Brady

Ceist:

611. Deputy John Brady asked the Minister for Employment Affairs and Social Protection the reason the cost of tax reliefs on private pensions was not examined in the Roadmap for Pensions Reform; if this means that tax reliefs will continue for those that need them least; her views on whether this is worthwhile expenditure; and if she will make a statement on the matter. [11674/18]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Employment)

Let me begin by clarifying that policy with regard to tax relief on private pensions is a matter for the Minister for Finance. However, I can say that I am in favour of financially incentivising retirement savings to help address a situation where the proportion of employees in Ireland with supplementary pension cover is far too low at just 35% of the private sector workforce. This suggests that a high percentage of the working population is not saving enough, or is not saving at all, for retirement.

Tax relief is a significant cost to the State but the benefits of tax relief are not at all well understood and many have little or no understanding of how the tax system impacts pension contributions. This is why in launching the new Automatic Enrolment system detailed in the Roadmap for Pensions Reform, to incentivise participation and mitigate the risk of member opt-out, the Government believes that any financial incentives must be effectively communicated, easily understood and appreciated.

To enhance the potential for the success of the automatic enrolment system, any State provided financial incentives should strive to give relief in a manner that supports low to middle income earners and be sufficiently attractive to encourage such earners to participate. Incentives should also avoid complexity and be as transparent as possible.

I can confirm that the Roadmap commits to a review of the cost of funded supplementary pensions to the Exchequer. This will inform decisions relating to financial incentives for retirement savings and underpin the development of an automatic enrolment system. It will include an assessment of the economic and social benefits delivered and an evaluation of equity in the distribution of tax expenditure on pensions.

The Roadmap also confirms that an Interdepartmental Pensions Reform and Taxation Group (chaired by the Department of Finance) will identity and progress measures to improve the harmonisation of rules to eliminate anomalies in the treatment of different retirement arrangements including taxation treatment.

I hope this clarifies the matter for the Deputy.