Brian Lenihan Jnr (Dublin West, Fianna Fail)

With regard to Deputy Bruton's amendment, the deferral arrangements for annuity purchase, which I introduced late last year, are by definition temporary and can be revisited as necessary. The amendment was proposed on Committee Stage and I explained that the rules relating to the requirement for members of a defined contribution scheme to purchase annuities with their pension funds on retirement had already been relaxed by the Revenue Commissioners on a temporary basis. Under the arrangement, members of defined contribution schemes who retire between 4 December 2008 and the end of 2010 have an option on drawing their pension entitlements: they can opt to take their tax-free lump sum and purchase a retirement annuity immediately on retirement, or they can take the lump sum and defer the annuity purchase subject to agreement with the scheme trustee. If the conditions that gave rise to the deferral arrangement persist over an extended period, the issue of a further deferral may have to be revisited.

During the Committee Stage debate on this issue it was indicated that the purpose of the amendment was to secure for PAYE taxpayers, as Deputy Bruton said, the same option that is currently available to the self-employed and others, namely, to place the main benefits from their occupational schemes into approved retirement funds. There are arguments for and against such an extension; the argument is not one way. Changing the scope of the existing arrangements is one of the range of issues to be addressed by the Government in the context of the longer-term pensions policy framework currently being developed. The matter is before the Government, which is examining this issue. There are arguments for and against the options, which are set out in the Green Paper. Extending the ARF option to PAYE workers would create a level playing field and a simplification of all pension provision. However, unlike annuities purchased on retirement, the investment risk attaching to ARFs will continue indefinitely and, as longevity can only be estimated, the funds of many retired individuals could be depleted prior to death, resulting in demands for income support.

There are difficult issues to be addressed and the Government is considering them. As Deputy Burton pointed out, we are all learning that it is safer to invest in gilts than equities, which was the traditional rule that always applied to trustees. The Government needs to devise a framework that will at least provide the opportunity for individuals to invest in a safe supplement to the existing State pension, which has become increasingly universal. The State has provided for a generous State pension by international standards and for many incidental benefits which are not available in other jurisdictions. That is as it should be. The question is how we can supplement this in a tax-efficient manner.

I am interested in Deputy Burton's comments about the increased cost of administering pensions occasioned by tax reliefs. On the question of the Financial Regulator, the process for recruitment of a new regulator, in which we have engaged Sir Andrew Large, a former deputy governor of the Bank of England, is now under way.

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