Richard Bruton (Dublin North Central, Fine Gael)

I move amendment No. 19:

In page 21, between lines 1 and 2, to insert the following:

"14.—The Principal Act is amended in section 779 by inserting the following new subsection:

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

This issue was discussed on Committee Stage but there was not a meeting of minds on it. However, a broad consensus was emerging that the issue of tax relief in regard to pensions is a serious one looming on the horizon. It contains some very serious inequities in the way in which taxpayers' money is distributed.

The reality is that the cost to the Exchequer of pension tax relief is running to approximately €3.5 billion per year. It is now more than the total spent on social welfare pensions. We know from studies that less than half the workforce is in these schemes. Half of the people at work derive no benefit from this very substantial pool. Among that 50% who derive no benefit are people on lower pay. That is not surprising because the incentives built into the tax scheme to support people on low pay putting money into pension funds is minuscule. They can only qualify for 20% up to a maximum cap on their incomes. They are capped in every way but most seriously on the affordability front. Many people on low incomes simply do not have the scope to set aside money and even if they find the scope, they only get a fraction of the relief available to much better off people.

There is also the unlimited capacity of firms to support the pension costs of chosen employees. The caps the Minister has introduced have been set at exceptionally high levels. Most of us, including Deputy Boyle, got these figures by way of parliamentary question but they came out again on Committee Stage. The scale of pension funds some individuals had accumulated — running to tens of millions of euros — was quite astonishing. Each year the State provides tax relief for the accumulated income. No tax is paid on the accumulating income in these huge funds. When the data become available and is published by the Revenue Commissioners, as I understand will happen in the next 12 months or so, there will be much outrage about the inequity in terms of how this money is distributed.

The considerable growth in this undoubtedly follows on from the introduction by the Minister's predecessor, Charlie McCreevy, of hugely generous increases in the level of provision available for people to put money into pensions. I am sure it was well-intentioned at that time. The then Minister believed there was a need to promote more pension saving and that was a legitimate objective. However, the very inequitable system of support which has emerged and the extent to which taxpayers' euros are going to small numbers of people in huge quantities while those most deserving of support in the pensions area are getting very little will not be acceptable to people when it comes to light.

I am disappointed the Minister's review of tax did not include a serious look at this issue. We must rebalance the taxpayers' contribution to funding pensions in a way which is much fairer. I do not pretend my amendment is the be all and end all in terms of what needs to be done.

I recognise the Government is committed to a Green Paper in this area but, to a large extent, I believe that is because this was an issue on which, in the last round of discussions on the partnership agreement, there was not a meeting of minds and serious engagement on how we would resolve it. I do not know the dynamic of how this came about. The rumour was that the Department of Finance was particularly disinterested in engaging in this area. I do not know whether that is true.

The existing system lacks fairness in the way it is constructed. Members will be obliged to retrofit it with fairness and this will require changes. Such changes cannot happen suddenly and must be planned and thought through. No Opposition Member is in a position to master the complexities involved to be able to do so, given the large number of groups with concerns that must be considered. However, as a symbolic first step in the required direction, those who put money aside and are below the tax threshold or who only pay at the standard rate should, at a minimum, receive the same level of credit or subsidy towards their pension as those who are much better off. That is the purpose of the amendment.

While this would merely constitute the start of a reform process in this regard, such a process must be embarked upon. It would put into sharper relief the position of Members on pensions. Those of us who are privileged to work in the public service have extremely generous pension rights compared to many of those who work in the private sector. Members have been particular beneficiaries in this regard. There must be greater balance in the manner in which this entire issue is dealt with in terms of public policy. There is a substantial job of work to be done to reform pension policy. While I am aware the Minister for Social and Family Affairs has published his views on some of the steps that must be taken, I have brought forward one among a number of measures that must be considered.

The Minister should view this proposal as a change that should be made now. Although it would not constitute the end of the route, it could not be regarded, by any stretch of the imagination, as an inequitable or unfair element of a change to be made now. However, I fear the Minister will respond by stating there is no point in making an ad hoc change. The ad hoc change I suggest is that reasonably well-off individuals would not be treated better than those on low incomes in respect of the support provided towards their pension contributions. When persons on low incomes put aside €1 in their pension fund, the State should match it with nearly €1. I understand the ceiling relief figure is 46%.

I do not want the Minister, for whatever reason, to respond that such a move should not be made as it could prejudice other matters. It certainly would not prejudice anything and would be simply a minimalist change to recognise what is happening. It would be, as the catechism used to say, a firm resolve to amend. Was that the phrase Members were obliged to learn? I cannot recall the exact phrase and my act of contrition has become somewhat rusty. The Minister should accept the amendment.

See this speech in context