Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the fact that the valuation has been moved to the end of June because I had a problem with basing a levy this summer on a date that had passed several months ago and that is the reason I regarded it as a retrospective levy based on a valuation date that had since passed. However, the Minister has made the change and it is not an issue.

I am pleased there will be a single valuation date. It may not be possible to quantify but I find it difficult to accept that there is no significant difference between a pension levy based on 1 January this year and six months later on 30 June. On the basis that, hopefully, over the course of this levy, we will see some growth in the economy and growth in valuation, I would expect the pension levy to increase over and above the target figure of €470 million, which the Minister indicated would be approximately 6% per year. These were the figures on which the jobs initiative was based. Even if there is a modest growth over the period of the next few years at 1% or 2% or 3%, the contribution from the pension levy each year will exceed the €470 million per year mentioned here when the jobs initiative was announced in the House. I ask the Minister to consider a Report Stage amendment to cap the payment per annum to a maximum of €470 million because if the value of fund increases the Minister will increase it.

When I spoke on Second Stage on this issue I noted it would exceed €470 million per annum. The sum of €1.8 billion projected for this month may transpire to be approximately €2 billion at the end of a four-year period due to rising values. While pension funds might begin to improve and be restored to what they were earlier, the amount of money that will be taken out of them will increase as the years go by due to increasing valuations.

I welcome the rationalisation of the dates which is good for the industry. Most of the amendments are technical and administrative to clarify definitions of defined benefits and single-member funds.

I want to deal with amendment No. 23. Deputy Doherty referred to how complicated this area is and it is difficult for the Opposition to draft an amendment on a levy. I had to do some reverse thinking. My amendment states:

In page 9, line 13, after "subsection (2)" to insert the following:

"or at a per cent chargeable on annuities which have been purchased with an insurance company or Approved Retirement Schemes (ARFs), whichever is the lesser".

I cannot ask that approved retirement funds from the Opposition side be included in the levy scheme because it would mean that a Member of the Opposition would impose a charge on the people. Given that a charge is not being imposed on the people, the same pension levy should be charged to everybody else as would be charged on approved retirement funds, which is zero. If the Minister is not putting a 0.6% levy on approved retirement funds he should not put a levy on anyone. That is where I am coming from.

I wish to discuss approved pension funds. Not only do 99.999% of the public not know what we are discussing, a proportion of the House is not far off that figure. When we discuss these matters we lose the general public. I want to explain my position. I welcome the 0.1 % of the membership of the Dáil, Deputy Mathews, to the debate. He might understand what I am talking about.

I want to explain to people what we are discussing. I do not want to table an amendment on approved pension funds and have people ask what it means. I do not know whether the Minister will accept the amendment. I want the Government Deputies, in particular Labour Party Deputies, to know what they are voting for if they do not support my amendment. I want people to understand what we are debating because there was a lot of debate on pension levies. This is the main issue I want to deal with today.

Pension funds are taxed in Ireland. Contributions and the gains to a fund are usually exempt, but they are taxed on draw down or pension treatment. When a person retires he or she has the option of investing his or her accrued pension fund. For clarity I am only referring to people in the private sector. The investment options include an annuity, a fixed sum of money paid to someone each year, typically for the rest of his or her life. Another option for people is an approved retirement fund, to which I will refer. A third option is an approved minimum retirement fund which is very similar to an approved retirement fund. The primary difference is that no withdrawal can be taken from the initial capital investment until the retiree has reached 75 years of age. Withdrawals can be taken at any time from investment gains made within the approved minimum retirement fund and they automatically convert to an approved retirement fund when the retiree reaches 75 years of age. We will not worry too much about that.

I want to discuss approved retirement funds because they are important. If the Government will not include the amendment the people should know who it is exempting from the levy. I object as a matter of principle that people who have what I consider to be a big pension pot will be exempt. That the new Government is creating a new loophole to exempt some of the pension pots of some of the wealthiest people while everybody else in the country will pay for it is fundamentally wrong. I do not think Members of the House should go along with that.

An approved retirement fund is a personal retirement fund where the retiree can keep his or her money invested after retirement as a lump sum. Everything I am discussing refers to amendment No. 23, to which I am specifically speaking, and is part of the group of amendments scheduled for discussion purposes. Every single sentence I say it will be relevant to the amendment. Some people may think my contribution will be a little bit long but it will be absolutely relevant and there will be no repetition.

The person can withdraw from such a fund regularly or give himself or herself an income on which he or she will pay income tax and Government and income levies when he or she withdraws from it. Any money left in the fund after the death of the person can be left to his or her next-of-kin. Investing in an approved retirement fund may be an option for four main groups - a self-employed person; a proprietary director; people who have PRSAs; and people who have defined contribution plans which were introduced in the Finance Act 2011.

What are the advantages of these funds? Why would the groups to which I referred avail of them? They do so because the retiree keeps control of his or her retirement money. It is not in the hands of an agent, trustee or anyone else. It may be important if the person is in poor health and wants to leave the money to his or her dependants after her death. The retiree has flexibility in terms of when and at what rate to draw down funds from the approved retirement fund.

The retiree can choose how to invest the approved retirement fund and select the type of investment that suits his or her needs and attitudes to risk. Any growth in the approved retirement fund is tax free but income from it is taxable. The retiree can always use his or her approved retirement fund to buy an annuity at a later date and if he or she did so he or she would be captured under the pension levy. As the Bill is currently drafted, such a person is outside the pension levy. Such a person may decide to buy an annuity to secure a regular income for the future.

By waiting the retiree may be able to get a higher annuity rate on his or her lump sum as he or she would be older. There are very attractive terms for passing on approved retirement funds to beneficiaries. The transfer of an approved retirement fund into the name of the deceased person's spouse does not incur income tax or capital acquisitions tax. If the fund is passed on to a child under 21 years of age he or she is exempt from income tax. A person aged over 21 will pay income tax but only at the standard rate. It is a tremendous scheme.

Who would put their money into such a fund? One would want to be wealthy, not wish to access it and want to leave a lump sum for one's family or next-of-kin when one passed on. Such a person would obviously have other sources of income and he or she would not necessarily need to draw on the approved retirement fund during its existence. Such a fund is specifically for a set group of people.

I have a number of other points. I mentioned tax implications. The Department of Finance conducted a review of tax and pension schemes and found they were being used by some high net worth individuals as a tax avoidance scheme. That is the official view of the Department. In subsequent years amounts not drawn down from approved retirement funds were taxed at 1% which increased to 3%. I understand the rate is now 5%, even if no money is withdrawn.

I referred to the 2006 report of the Department of Finance. It did not reveal the names of the individuals who had accumulated very large pension funds. I tabled a parliamentary question to the Minister last week on how many of these funds are in existence, their value and potential yield. An official from the Department said he would not have that information because it is private sector money.

After a discussion, I received an answer from the Department from a competent official with whom I spoke and whose name I do not remember. I understand from his comments that the Minister does not know the value of the pension pots held by wealthy individuals which will not be covered by the levy on pension funds.

I will refer to other aspects of this issue which are in the public arena. As I noted, the Department of Finance did not reveal the names of the holders of approved retirement funds, ARFs. However, subsequent reports in the media suggest that the individuals in question include executive directors of some of the banks and building societies. Many people will be familiar with the book, Banksters: How a Powerful Elite Squandered Ireland's Wealth, which was written by D. Murphy and M. Devlin and published by Hatchette Books in 2009. It reports that an estimated pension of €13.5 million was transferred from Anglo Irish Bank into a separate pension scheme in 2005, which was before Seán FitzPatrick stood down as chief executive. Writing in The Irish Times on 9 October 2010, the respected journalist, Colm Keena, citing Mr. FitzPatrick's statement of affairs and related court documents, stated that Seán FitzPatrick had an approved retirement fund amounting to €9.1 million in November 2009. The Irish Nationwide Building Society reported in its published accounts for 2008 that on 12 January 2007, pension obligations to its chief executive officer, Mr. Michael Fingleton, were settled by transferring €27.6 million outside the control of the group. It is understood these moneys are in an approved retirement fund. As part of public accounting, all public companies in the non-financial sector are legally obliged to include details of pension payments to directors and chief executive officers in their annual reports, as do Bank of Ireland, Allied Irish Banks, Anglo Irish Bank, Irish Life and Permanent, the Educational Building Society and Irish Nationwide Building Society. These details are, therefore, on the public record.

The simple question that arises in this connection is whether individuals holding pensions in approved retirement funds will pay the pension levy. Having argued on Second Stage that the levy will apply to ARFs, I hope the Minister will provide a positive response and ensure the House does a good day's work. Given the highly technical nature of the legislation, it is possible that the Bill already provides for the proposal in amendment No. 23. The amendment we discussed earlier related to sections 784 and 785 of the Taxes Consolidation Act. My party was constrained in the amount of research it was able to do before tabling the amendment which essentially provides that all payments from approved retirement funds will be covered by the pension levy.

See this speech in context