67. Deputy Brendan Griffin asked the Minister for Finance if legislative proposals furnished to him by this Deputy in relation to imposing a super-levy on bailed out bankers, former politicians and civil servants will be implemented; if not, if he will provide specific detailed reasons; if he has specific proposals of his own to tackle the unjust pensions currently being paid; and if he will make a statement on the matter. (Question 57477/12 asked on 20 Dec 2012)
Minister for Finance (Deputy Michael Noonan): As the Deputy will be aware, Government pension policy formed a key theme of my recent Budget. In framing that Budget, I considered a range of complex issues and proposals relating to pensions policy including the draft legislative proposals furnished by the Deputy. As the Deputy will appreciate, the pensions sector is a very important part of the financial services industry in Ireland and provides a service to enable people to make provision for their retirement and for their old age. As it is in everyone’s best interest the Government wishes to encourage as many citizens as possible to continue to invest in pension schemes.
It is the case that some people have been allowed by previous Governments to benefit from hugely generous pension arrangements subsidised by the taxpayer. While this Government wants to encourage those on lower and middle incomes to save for pensions, it will not allow pensions of the scale previously allowed to be accumulated at the expense of taxpayers whose actual earnings are, in many cases, a fraction of those large pensions.
In Budget 2013, I set out this Government’s policy on a number of important issues:
Tax relief on pension contributions will only serve to subsidise pension schemes that deliver income of up to €60,000 per annum. This will take effect from 1st January, 2014.
Tax relief on pension contributions will continue at the marginal rate of tax.
The Pension Levy announced as part of the Jobs Initiative will not be renewed after 2014.
Constitutional and legal constraints severely limit what steps the Government can take in relation to pensions already in payment. However, in order to ensure equity between all citizens based on their level of income, the reduced rate of USC for those over seventy with an income in excess of €60,000 will be discontinued from the 1st of January 2013 and the standard rates of USC will apply.
In addition, in the interest of fairness, Top Slicing relief will no longer be available from the 1st of January 2013 on ex-gratia lump sums in respect of termination and severance payments where the non-statutory payment is €200,000 or over. At present the individual’s average tax rate for the previous three years applies to such lump sums rather than the marginal rate of 41 per cent.
I have been advised in numerous submissions of the value of allowing limited early withdrawal from AVCs. Therefore, in the forthcoming Finance Bill, I will make provision for persons with AVCs to withdraw up to 30 per cent of their value. Any amounts withdrawn will be subject to tax at the individual’s marginal rate since marginal rate relief was provided on the contributions on the way in. The option will be available for a 3 year period from the passing of Finance Bill 2013. As the Deputy will be aware, the Bills Office is available to assist Deputies in developing and preparing any legislative proposals they may have. The Deputy may wish to consult with that office in relation to his legislative proposals on this matter.