Róisín Shortall (Dublin North West, Independent) | Oireachtas source

The system of pension tax reliefs is undoubtedly the most regressive aspect of our tax system because it disproportionately benefits the much better-off. The more one can afford to put by - indeed, the more one's employer or company can afford to put by - the greater the subsidy one receives from other taxpayers, who may not be able to afford a pension for themselves. The present system entails a significant transfer of funds from low and middle-income earners to the better-off. In effect, it is a form of corporate welfare and, as such, is a scandal that must be tackled. There is a paucity of detailed data on pensions in this country, perhaps conveniently so. What we have here is a lack of transparency as to where a very large proportion of the tax take is going. There is an onus on the Revenue Commissioners to tackle that issue.

We do know that the spend on pension relief is some €2.5 billion per annum, which is approximately the same as child benefit. Unlike child benefit, however, which goes to every child in the country, the ESRI has estimated that some 80% of tax relief goes to 20% of earners. The pension system should be about encouraging people to save during their working life so they can enjoy their retirement in some degree of comfort and free from the concerns of poverty. It should not, as it currently is, be a vehicle for tax avoidance. All taxpayers should be treated equally. We can achieve these objectives while also making very significant savings of at least €500 million if there is the political will to do so.

Unfortunately, the Government did not target savings in the pension area in the last budget. There is no excuse for doing the same this year. There must be equity between all public and private sector workers. It is time to reduce significantly the annual cap on the amount of pension contributions for which tax relief can be claimed. This cap must include employer and company contributions as well as employee contributions. There can be no justification whatsoever for subsidising pensions above approximately €50,000 per annum. It is far preferable to opt for a cap, as was done in the United Kingdom in recent years, than to standard-rate relief. Standard rating would remove the incentive to save for people of modest incomes of €33,000 or so. It would also lead to a significant reduction in take-home pay for workers in this category.

There is no justification for the provision of tax-free lump sums of €200,000. That figure should be reduced by at least €50,000. The current maximum pension fund of €2.3 million is completely excessive and there can be no moral or economic rationale for it. There is no justification for subsidising pensions above the level of approximately €1.5 million. It is a cop-out to say that a cap cannot be applied retrospectively. It is an affront to most decent people that there are individuals who have disgraced this country - leading lights of politics, business and banking - with pension pots in the region of €30 million or €40 million. There is an onus on everybody in this House to ensure this scandalous situation is tackled. A failure to do so will mean that none of us will have any moral authority when it comes to making savings in any other area. Unless the Government takes serious action in this regard in the coming budget, it has no moral authority to continue to govern.

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