Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 16:

In page 31, between lines 17 and 18, to insert the following: “Report on pension tax reliefs and subsidies

24. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax reliefs and subsidies applicable to pensions, including contributions and at drawdown, to assess their cost to the Exchequer and distributional impact.”.

The amendment seeks a report on the tax reliefs applicable to pensions, including the contributions and drawdowns. Tax relief on employee pension contributions costs more than €1.2 billion. That is not to say that at least some of that is not money well spent. There is a policy objective to encourage people to invest in their pensions and they are taxable on drawdown. However, more than 30% of the €1.2 billion in relief, or €378 million of it, was availed of by the top 3% of earners. We need to be conscious that, while pension tax relief is a good social policy and should be retained, the distributional impact is skewed. Some €378 million in tax relief going to the top 3% of earners should raise serious questions.

Our proposal, which is long-standing, is to reduce the earning limits for tax relief for employee contributions from €115,000 to €60,000. It is important the Minister understands this as he has claimed on a number of occasions that we would hit the pension tax relief of people earning €60,000. That is not how the earnings limit works. It is the that people can put a percentage of a certain portion of their income into a pension and still get full pension tax relief on it. Our proposal would still allow for an employee to avail of full tax relief on pension contributions of €24,000 per year. The average pension contribution in 2022 was less than €3,500. If the earnings limit is reduced from €115,000 to €60,000, people would still be able to put €24,000 per year into their pensions and get full tax relief on it. Few people are able to do that.

It is also worth noting that equalising the age-related percentage limits which increase with age to the highest percentage limit would be cost neutral. That is what we suggest. There is merit in doing this. There is a strong rationale and that is why we would continue to allow income earners to put up to €24,000 into their pensions every year and get full tax relief on that contribution. However, we need to look at the fact that €378 million of the €1.2 billion overall cost of pension tax relief goes to the top 3% of earners. It is disproportionate and needs to be looked at. The best way to do that would be to examine the issue in terms of the available subsidies, the tax reliefs available to pensions, the contributions at drawdown, the cost to the Exchequer and the distributional impact in a report to be laid within six months of the passing of the Act.