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Pension Provisions

Dáil Éireann Debate, Thursday - 31 May 2018

Thursday, 31 May 2018

Ceisteanna (63, 69)

Michael McGrath

Ceist:

63. Deputy Michael McGrath asked the Minister for Finance his Department's role in relation to A Roadmap for Pensions Reform 2018-2023; his views on the tax relief on pension contributions at the marginal rate; his further views on the retention of the tax relief at the marginal rate; and if he will make a statement on the matter. [24109/18]

Amharc ar fhreagra

Michael McGrath

Ceist:

69. Deputy Michael McGrath asked the Minister for Finance the membership of the working group set up by his Department to examine the tax relief on pension contributions; the terms of reference of the working group; if the working group will assess the tax position on pensions in its entirety including taxation upon extraction by pensioners; and if he will make a statement on the matter. [24226/18]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 63 and 69 together.

The Government published A Roadmap for Pensions Reform 2018 - 2023 in February this year and my Department was involved in contributing to the development of the Roadmap. The Roadmap takes a holistic view of pension issues and details specific measures presented under six strands.

While implementation of the Roadmap is primarily a matter for my colleague the Minister for Employment Affairs and Social Protection and her Department, the Interdepartmental Pensions Reform and Taxation Group (IDPRTG) was allocated a number of specific measures under the Roadmap. The IDPRTG is chaired by the Department of Finance and includes representatives from this Department as well as from the Department of Public Expenditure and Reform, the Department of Employment Affairs and Social Protection, Revenue and the Pensions Authority.

Strand 3 of the Roadmap is concerned with improving the governance and regulation of supplementary pensions to, among other things, achieve scale, improve standards and simplify the provision of pensions. The actions allocated to the IDPRTG under the Roadmap derive in the main from Strand 3, and the terms of reference of the Group reflects this focus.  

Action 3.13 of the Roadmap provides for a review of the cost of funded supplementary pensions to the Exchequer in the context of the development of a new auto-enrolment scheme. The Deputy will be aware that relief on pension related tax relief represents a large and generous tax expenditure.  Ireland operates an ‘Exempt, Exempt, Taxed’ or EET structure for pensions tax relief. Under EET, and subject to certain restrictions, pension contributions and investment returns on pension funds are exempted from tax but pension drawdown is taxed at prevailing tax rates through the income tax system in retirement. On this basis, it is considered that marginal relief represents a significant incentive to encourage pension savings and to a degree represents a deferral of taxation.

The IDPRTG is currently considering this issue and will report by the end of the third quarter.  As Minister for Finance, tax policy is a matter for me and my Department, and the work of the IDPRTG will be considered in that context.  

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