Jim Walsh (Fianna Fail)

I must declare an interest as I have a small self-administered pension. The change made by the Minister is interesting and I welcome it. As was stated, this area has been subject to exploitation. I will not use the word "abuse" because Opposition spokespersons fail to remember that apart from the 25% tax-free lump sum provision, the rest of pension is a deferral of tax because tax is paid as money is drawn down from the pension fund. It is not paid when it goes in.

Some comments made regarding the maximum figure of €5 million were wide of the mark. Most people who have self-administered pensions retire at 60 or have provision within the pension to do so. I checked this with people dealing with pension funds. The annuity rate is approximately 2% to 2.5%. Putting €5 million into annuities means paying €100,000 per year. For senior company executives on €200,000, €300,000 or €400,000 per year that is not an overly significant amount.

Those of us in these Houses and those who work in the public service are fortunate because we have pension facilities and remuneration which cannot be bought in the private sector. For example, the purchase of a pension fund with €5 million would yield only a modest pension and would not be the equivalent of the kind of pensions available to those in the public service, which are index-linked. That must be borne in mind. The public sector has made an enormous contribution towards creating the policy climate which contributed to economic growth. It must also be stated that many in the private sector worked extremely hard, invested money, took risks and undoubtedly also made a significant contribution.

I do not agree that the figure should be further reduced nor that the 3% should be increased because that is the type of return obtained on the annuities market. On the question of abolishing the 25% lump sum as suggested by Senator Terry, we must remember that most employers have moved from defined benefit schemes to defined contribution schemes. That is the pot of money which will be there not just for executive workers but also for industrial blue collar workers. It is an incentive for people to participate. Less than 50% of our working population is in pension schemes. It is necessary to keep it attractive to increase that percentage. With demographic changes, it will become a significant problem in the future. I suggest we maintain the figures.

As it is probably too late to make changes at this stage, next year the Minister should examine the 3% distribution from the ARF applying from year one. The lump sum drawn down could maintain the person for a number of years. Reference has also been made to those who may have planned to retire at age 60, but because of the economic situation or their good health, they will continue to work until age 65. An argument could be made for a deferral period before distribution from the ARF would be triggered, such as a certain number of years or reaching age 65 rather than 60.

Tremendous improvements to pension funds have been made in the past decade. To some extent what happened in the United States, where people accumulated a considerable amount of wealth, may have influenced our course of action. My aspiration is that people in Ireland continue to accumulate wealth and that our children and grandchildren will have a better quality of life and far more assets than we do. That is how the country is progressing and we should facilitate it through the policy decisions we make.