Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I move amendment No. 97:

In page 95, between lines 35 and 36, to insert the following:

“Personal Retirement Savings Account

85. Section 787J of Chapter 2A of the Principal Act (as inserted by the Pensions (Amendment) Act 2002) is amended by the repeal of subsection (3).”.

This amendment relates to the taxation treatment of PRSAs, personal retirement savings accounts, which were introduced in 2002. There are two points at which PRSAs are severely disadvantaged when compared to normal occupational pension schemes. The employee is liable for a universal social charge, USC, on employer contributions to a PRSA. In the case of PRSAs, both employer and employee contributions are subject to Revenue limits allowable for tax relief, while in the case of occupational pension schemes, only the employee contributions are subject to Revenue limits.

The Finance Bill provides for an exemption for employees from USC on employer contributions to a PRSA, which is welcome. It brings the USC treatment of such contributions in line with employer contributions to occupational pension schemes. However, there is no proposal to address the second anomaly, whereby both the employer and the employee contributions to the PRSI are reckonable or taken into account in terms of the overall amount which can be contributed within the allowable limits. That is an issue which needs to be examined.

The current situation means that more contributions can be made to defined contribution plans than to the PRSAs. This has a major impact for a small number of PRSA holders and is deeply unfair. It particularly impacts those whose pensions are underfunded and who are striving to close the gap. PRSAs are principally designed for those with no occupational pension scheme. National and government policy for some time has been to encourage people to provide for their future well-being and their retirement. To discriminate against PRSAs vis-à-visoccupational pensions by counting employer contributions towards the allowable limits for tax relief strikes me as unfair. I am not sure what the original justification of it was.