Jim Walsh (Fianna Fail)

From listening to the debate, it seems to me that there is a misunderstanding or fallacy. As regards the €2.5 billion and the fact that it is benefiting the pensions industry, we are fortunate to be in the public service and part of that figure comprises pension contributions deducted from our incomes before we are taxed, which the Senator making the point may have overlooked. That applies across the public service.

Those of us working in the public service, and I have some insight in that I worked on the other side of the fence for a long time, should be mindful of the tremendous advantage we have over those in the private sector in that we enjoy pensions which are index linked and which one could not purchase in the private sector because they would be too costly. We should be mindful of that when we talk about people who are in employment. The Minister might clarify the figure but I understand fewer than 50% of people in the private sector enjoy an occupational pension. The figure is quite low. I do not believe any of those would be inclined to put their money into a pension fund if tax relief was not available. The tax relief is an inducement.

Another aspect we should take into account is the fact that the tax is not lost. It is deferred tax, similar to the way we offer depreciation in business. Ultimately, when the pension is being paid it will be subject to the full PAYE system. In the case of lump sums, and much innovative thinking has gone into improving the pension regime over the past four or five years, they are subject to tax at 23%. It is not as if the State does not get that money. It is a fallacy to believe that that €2.5 billion will accrue to the Exchequer if a decision was made in the morning by the Minister for Finance to remove tax exemption from contributions to pension funds.

An argument may be made for allowing people in business to determine their own level of salary and where millions of euro may be placed in pension funds as a tax efficient means of accruing wealth. Perhaps we could examine that issue, but statistical data would be needed to research it properly to be able to determine where the hammer should be brought down, so to speak. Looking at the demographics of the country, the thrust of the legislation has to be to encourage more individuals to subscribe to pension schemes and, in particular, to encourage employers to participate and make pension schemes available to their staff.

It is a matter of social equity that people who give their life to a company should, at the end of their days, have sufficient income to maintain themselves in retirement. Companies do not tend to have social consciences but many employers do and without this tax exemption that would not happen at all. Rather than remove incentives, the Minister should consider ways of encouraging more people to participate. As the Minister pointed out, we should examine the area in detail to determine if abuses are taking place. If this income is being siphoned off into pension funds we should examine that issue to determine the measures that need to be taken. To go the route Senator Terry suggested, however, would be folly because only a fraction of the €2.5 billion would accrue to the Exchequer. It would be a self-defeating exercise. That suggestion was made from the comfort of a public sector pension, of which I am a beneficiary also, as are the other Members here.