Róisín Shortall (Dublin North West, Labour)

I welcome the fact that finally the Government has recognised a need to do something on the pensions front. For years it has been in denial about the fact that our pensions system was more about facilitating tax avoidance than encouraging pension provision. The way in which it operates, as the Minister and her officials will be aware, has been inequitable. That is the reality. A total of €3 billion has been spent per year on tax relief on pensions and the vast bulk of that has gone to the top 20% of earners.

Side by side with that outrage, as I would regard it, almost 50% of workers do not have any private pension provision and therefore as a policy it was ineffective while the manner in which it operated was inequitable. I welcome these first steps in implementing reform in this area, but overall the Minister is not going anywhere near far enough.

The Labour Party, in its pension proposals, has estimated that it would be possible to save a minimum of €400 million in the coming year, and possibly up to €600 million, if there was a proper root and branch reform of the pensions tax relief system. That could be done in a way that would not impact on people with incomes of up to €100,000. We could ensure that there was still a major incentive for people on middle and modest incomes to make pension provision but, unfortunately, the Government has chosen to take a different route.

I find it extraordinary that in each of these five measures the Minister has a costing and a figure for each one of those. The Labour Party is extremely concerned that we have spent the past three years trying to get costings from the Minister for Finance, the Department of Finance and the Revenue Commissioners for different aspects of our pension provision and on every single occasion we have been refused and told that no figures were available. The reply to my last parliamentary question a few weeks ago denied that figures were available anywhere. I was told the Department was now approaching the pensions industry to try to get some estimates.

The Minister was not in a position to provide figures to the Labour Party in spite of the fact that a service was offered that she would cost our pre-budget proposals, and today she could come up with figures for each one of those measures. How did that come about? If she was unable to provide those figures last week and was unable to provide them over the past three years when we have been asking for them, can we believe these figures now? Are they accurate and how is it that the Government can just come up with them suddenly?

In respect of the individual proposals, we will not oppose the annual earnings limit but it could have been done in a much better way. We should take our example from what is happening in the UK where a cap is being introduced on the total amount of tax relief that can be claimed, whether the contribution is made by the employee or the employer. That is the weakness in these proposals and in the proposals signalled in the four year plan. All the Minister is talking about doing is limiting the employee contributions. The really big money, as the Minister well knows, is in the employer contributions and it makes no sense to exclude those from any new limits. Let us stop codding ourselves on what is happening in the pensions area. Why does the Government continue to facilitate persons in jobs where their employers can fund their pensions generously and what is the rationale for not applying the same kind of limits to employer contributions as employee contributions?

On Financial Resolution No. 6, the maximum allowable pension funds, the Minister proposes to reduce the maximum standard fund threshold from the current €5.4 million to €2.3 million. It is a move in the right direction, but why has the Minister not gone further? A fund of €2.3 million will entitle a person to a pension of €100,000. I see no justification for taxpayers subsidising pensions for persons who end up with a pension of €100,000 at a time when the Minister introduced the universal social charge, which will impose additional taxes on persons on modest pensions. Pensioners with an income of under €40,000 will now be hit for an additional €2,000 through the universal charge and through the tax changes, and yet the Minister is saying it is acceptable that somebody would be subsidised to the tune of the top rate of tax relief to enable him or her to have a pension of €100,000. There is no justification or rationale for that. The Labour Party favours reducing the total fund to €1.6 million.

Financial Resolution No. 7 is a reasonable proposal and we do not have a difficulty with that. On Financial Resolutions Nos. 8 and 9 on the retirement lump sum, my party agrees with reducing the lump sum. The current lump sum of €1.3 million, that the wealthiest in society are entitled to take without paying a single cent of tax, is indefensible. It is an outrageous amount of money. There is no justification, socially or economically, for having such a regime. It is about time that lump sum was lowered. In recent years when we have had to take such austerity measures and when there is such hardship being caused to persons on low incomes, how can the Minister defend a situation where the wealthiest are walking off with €1.3 million tax free on retirement? It is scandalous that it was ever the case and it is scandalous that the Minister has allowed it to continue up to now.

I welcome the fact that the Minister is talking about now reducing that maximum tax-free lump sum to €200,000. I still think it is too high. It should come down below €150,000. That would be reasonable still.

I refer to the Minister's proposals for the transitional arrangements for persons who currently have funds in excess of the new threshold being proposed where he is allowing them to take a tax-free lump sum. He is changing this tonight - we are voting on it shortly - but the Minister will still continue to allow persons who have bigger funds to withdraw tax-free lump sums of €575,000. There is no justification-----

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