Brian Cowen (Laois-Offaly, Fianna Fail)

There seems to be some amnesia on the opposite side about the fact that this Bill provides for the first time in the tax code for limits and fixed amounts beyond which the State will not provide relief for pension provision. This has not been done before by any Government. I did not hear much comment about that in the contributions. I remind Members that I commissioned the internal report on pensions and I acted on its findings.

Deputy Bruton's amendment is concerned with contributions to occupational pension schemes by those on lower incomes and seeks a tax credit to be contributed by the Exchequer to the individual's pension scheme equivalent to relief at the higher rate of tax of 42%. I presume the amendment proposes that this tax credit is to be in place of relief the individual may be getting at the standard rate, assuming they are in the tax net.

The proposal is similar to one of the recommendations made in the recently published national pensions review. The Bill provides for a once-off incentive for those lower paid with SSIAs who are in the savings habit to invest their SSIAs in pensions. Further work is ongoing in this respect.

The question of pension provision in the longer term is a separate matter. The national pensions review produced by the Pensions Board provides a basis for consideration which the Government is giving to the overall pensions situation. This consideration is a work in progress. The chief executive of the Pensions Board when referring to the report which issued before Christmas, stated: "Its detailed analysis and costing of the pension situation are at least as important as the recommendations and should continue to be used as a frame of reference going forward". There is work to be done on analysing and costing the situation.

The board understands that further decisions must be made in the context of employment interests, competitiveness and overall economic and social considerations. The Pensions Board considers that its analysis and recommendations must be considered by the Government in a wider context. The Government has taken no position on any of the recommendations in the report nor is it a question of addressing these in the Finance Bill at this stage. The wider policy issues raised by the Pensions Board will require further and ongoing examination by Government.

Deputies have been pressing me on the need for the analysis of tax decisions. I remind the House that decisions relating to pensions have far-reaching effects which are long term and go to the heart of our tax structure. I presume Deputies will want the Government and I as Minister to undertake the necessary analysis before proceeding.

The cost of increasing tax relief for pensions to 42% depends on the uptake but it is clear it could be very significant and this must be borne in mind in future policy analysis in this area. For that reason alone I cannot accept the amendment at this time.

The report of the Pensions Board, which listed the possible means of incentivising wider pension coverage, acknowledged that one effect of such a change might be simply to confer additional tax relief on those already saving for pensions. There are other considerations with respect to this proposal. The potential for those dead weight costs would need to be taken into account in assessing it.

Deputy Bruton stated the cap I instituted would give approximately €500,000 of an annual pension per year. Given increased longevity rates, a pension fund of €5 million less the lump sum will give a male retiring at age 60 an annual pension of approximately €110,000 for life. Where a person retires at 65, the annual pension will be approximately €135,000. The average life expectancy is based on Central Statistics Office data. A male aged 60 in 2001 has a life expectancy of 19 years and when retiring at 65 it is 15.4 years. There is a general consensus that life expectancy will continue to improve. The CSO assumes that by 2030, average life expectancy for a male aged 60 will be 25 years.

Deputy Burton raised the issue of publishing lists of schemes approved under Part 30, Chapter 1, of the Taxes Consolidation Act. This is similar to an amendment proposed on Committee Stage. It relates primarily to the small self-administered occupational pension schemes or SSASs, which are generally one-person schemes and also used to improve retirement funds. The proposal seems to be that Revenue would publish details of SSASs approved by them each year. During the earlier debate, I indicated on Committee Stage the fundamental difficulty with the proposal, which is the issue of taxpayer confidentiality. With regard to SSASs in particular there is a very real risk that in publishing the information sought, individual taxpayers could be identified. All taxpayers have a legitimate expectation of privacy in their dealings with Revenue and the release of a taxpayer's personal information in this manner would undermine those expectations. Those issues must be respected.

The pensions provisions in the Bill seek to close off excessive funding for pensions, to limit the amount that can be drawn from pension products by way of tax-free lump sums and to restrict the capacity of individuals to use ARFs as purely long term tax-exempt vehicles. I am confident these changes will have the intended impact and will create greater equity in the area of pensions tax relief.

With regard to State pension provision, the record of this Government is far better than any of its predecessors. Pensions have increased by more than 120% at a time when the consumer price index has increased by 35% or thereabouts.

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