Dáil Éireann Debate, Wednesday - 10 April 2024
5. Deputy Richard Bruton asked the Minister for Finance if he has considered how the tax system might make a better contribution towards adjustment to a longer and more fruitful retirement through supporting rightsizing, early release of pension savings in certain circumstances, more flexibility in continued working from employers, better recognition of family carers and in other ways; and if he will make a statement on the matter. [15262/24]
Amharc ar fhreagraI believe the tax system can make a much better contribution to positive ageing, especially around issues such as family caring, working beyond retirement age and the rightsizing of homes. Has the Minister looked at reforms that might promote such positive outcomes?
The Deputy has raised the importance of policies designed to support individuals in retirement. As both career paths and the shape of life after retirement change, Government policies need to continue to align with the needs of retirees. Pensions have their own special treatment within the tax system to encourage these preparations. Ireland operates an exempt-exempt-taxed 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, other than a tax-free lump sum, is taxed. This is intended to encourage individuals to save appropriately for retirement.
As the Deputy will be aware, the Government remains fully committed to supporting and protecting the most vulnerable in society through both tax and expenditure measures. The income tax system contains a number of provisions that have been introduced to provide additional supports to family carers, such as the home carer tax credit, the incapacitated child tax credit and the dependent relative tax credit. Those over 65 are treated in a more favourable manner by the income tax system. There is also relief from capital gains tax for transactions involving individuals' homes. These existing supports should facilitate many of the concepts the Deputy referred to.
In this context, it is important to consider whether the tax system is the appropriate vehicle for further supports for retirement income. Taxation is only one of the levers available to the Government and, generally, the presumption should be that non-tax measures should be considered before the use of a tax-based measure. I reiterate, however, that the Government remains committed to taking appropriate action to support retirees where required. If the Deputy has any suggestions or policy proposals, I will be more than happy to engage with him and to have them looked at in detail.
I agree with the Minister that tax is only one of the levers, but I might give him some examples. Approximately 50% of people would like to work beyond their retirement age but most of them are denied that opportunity. Fortunately, we are not among that group. That is something that could be promoted by making flexible working more amenable for employers to deliver through tax breaks.
About 90% of people in my age category live in homes that are too large for their need, but there is no support for rightsizing. The Minister might have seen a recent column by a prominent journalist describing the difficulties in that regard.
To take another example, while we do not support family caring through the tax code, we do support paid carers, but only 1,600 cases of those reliefs are being provided for. The intention is there, but it is not getting through in a lot of these cases and there needs to be innovative thinking.
I thank the Deputy. Those are all important issues he raised. Tax policy can play an important role in supporting wider public policy objectives, and when it comes to vacant bedrooms, for example, and the spare capacity that is there, we have the rent-a-room relief scheme and there is already a generous CGT relief for a principal private residence. Nevertheless, again, if the Deputy has any ideas or proposals, we will be more than happy to look at them.
I agree with him about having a system that is as flexible for workers as possible. We have made some important strides through the changes to the State pension system, for example, allowing people to work for longer and postpone drawing down the State pension to make up for any shortfall they may have in PRSI contributions and to get an actuarially varied pension as a result. All those flexibilities are there and our colleagues in the Department of Enterprise, Trade and Employment have made important moves to enshrine flexibility in work environments generally in the context of retirement ages. Of course, the public service has led the way by allowing people to work up to the age of 70. That said, tax does have a role and I would be very happy to engage with the Deputy.
To take that example, if a work contract states a person can work to 66, he or she cannot take up the options the Minister is offering to work beyond 66 because the employer's contract will trump the right to take up the social welfare option. There needs to be some innovative thinking, between the Minister’s Department and the spending Departments, to come up with some workable initiatives, because in the midst of a housing crisis, 90% of people aged 65 and over living in homes that are too big for their needs is a missed opportunity.
There is a need for some approach to this without waiting for this potential commission on caring. There are things that could be done more quickly.
When it comes to employment, we have made important progress. There are complexities where you have an existing contract of employment in place in the private sector that specifies a retirement age that is mandatory in nature at a certain point in time. However, beyond the existing contracts, it will be possible to make change and I know that is a policy area the Department of Enterprise, Trade and Employment is focused on. We have a lot of issues that have to be considered when it comes to the changing demographic nature of our population and the consequences in terms of care, health, incomes into old age, property and the issue of underutilised residential stock. It always has to be on the basis of supporting people, giving them options and incentivising decisions rather than a stick approach. That is what will characterise the Government's approach to these issues.
