Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Applying the USC and PRSI in addition to an income tax charge would mean a rate of deduction of 52% where a USC of 7% and PRSI of 4% are added to the higher income tax rate of 41%. My purpose in providing access to AVC savings was with a view to enabling such access in a limited way while at the same time not incentivising it. Many of the representations I have received on this issue over the last year or so have been from ordinary individuals who found themselves in financial difficulties and were seeking some access to their pension savings in order, for example, to facilitate debt repayment. I did not see any merit in introducing the facility for limited AVC access on the one hand while at the same time imposing a rate of reduction that would to all intents and purposes largely frustrate the initiative at the outset. At the end of the day this is a policy call and in my view the imposition of the marginal rate of income tax on such payments gets the balance right. The policy decision was to tax on exit at 41% but not to add on the USC or PRSI. It was a policy decision because 41% is a big deduction if one is drawing out funds from AVCs to clear debt. If another 11% were to be taken off it, it defeats the purpose of putting in the enabling provision. That is the balance I struck in deciding where to pitch it.