Richard Bruton (Dublin North Central, Fine Gael)

I move amendment No. 10:

In page 9, between lines 15 and 16, to insert the following:

"1.—A person, none of whose taxable income is chargeable at the higher rate, who makes a pension contribution within the limit set out in section 779 of the Principal Act, shall be entitled to receive a tax credit contributed to the pension scheme equivalent to relief at the higher rate.".

This amendment deals with the entitlement to pension relief. In our system, as the Minister knows, pensions are one of the few areas where we have not standardised tax credits. People are entitled to pension relief at their top rate and in many cases to relief on social insurance contributions. That is fine for people who are on the top rate of tax but, as we know, many people are on the standard rate or do not pay tax at all.

The benefit of the relief to those on a low income is, at best, less than half of that accruing to high-earners. It is an ad valorem relief whereby the more income a person has the more relief they receive. At the top of the scale a person can earn up to €247,000 and get relief for pension contributions at up to 40%, meaning the taxpayer contributes a subsidy to such a person's pension fund of €41,500 each year. They are effectively in receipt of matching money each year. The Minister envisages that people can accumulate up to €5 million per individual fund, which would generate a pension of close to €500,000 per year. One half of that will have been funded by the taxpayer, which represents an extraordinary largesse compared to what somebody on the standard rate of tax receives. One half of the population has no pension cover whatsoever other than the social welfare pension and it does not take a genius to know that that half will predominantly comprise the low-paid. It can safely be assumed that three quarters of the low-paid have no pension cover.

We are presiding over an unjust shareout of taxpayers' money in this regard because, as I am sure the Minister's advisers will confirm, the total value of concessions under the pension relief provisions amounts to approximately €300 million. If there was an analysis by income distribution, which there is not at the moment, I safely assume it would reveal that two thirds of that money will go to the top 10% of earners. It is a very iniquitous spread in what is a generous area of tax relief.

I am in favour of encouraging people to provide private pensions but it must be done on a fair basis. In particular, we must encourage people at the low end and the purpose of my amendment is, at the very minimum, to give people relief at 42% regardless of where they are on the income scale. People will rightly argue that those on a standard rate do not have a huge amount of spare income to put into a pension but at least they would be given the opportunity to do so. The Minister will say that this issue is under consideration but it has been under consideration for a very long time. The only gesture made this year was a small one, though we cannot complain about any gesture. It allowed the small number of people in this category with SSIAs to be able, as a concession, to put an extra €2,500 into their pension using the tax relief.

When these data are available in some 12-18 months there will be a huge outcry at the way in which the money is being shared between those on modest and those on higher incomes. Some people privileged enough for an employer to put money into a fund for them can contribute an unlimited amount. We have seen that used as a way of paying senior executives non-taxable income. I am not sure there is any authentic public benefit in that system.

We should have reformed the system long ago. We did not reach this section on Committee Stage but on Report Stage the Minister responded that he would need a study before he would concede the suggestion. He thought the costs might be greater than the benefits, but I cannot understand his logic. We have conceded that there are huge benefits in relief for pension provision, which is a bulwark of our tax code, but it is preposterous for the Minister to say he needs an analysis to help him decide whether to give at least as much, in percentage terms, to the lowest paid as to the top paid. It is purely a debating point rather than a serious attempt to address the issue. More seriously, he says he wants time to review the pension board study but I have met with the Minister for Social and Family Affairs, Deputy Brennan, who has presumably studied the issue in great depth and he has said he supports the proposal. It is clear that among those most informed in Government it is regarded as a good path to take. We should not hesitate to do so and I hope the Minister will agree.

See this speech in context