Katherine Zappone (Independent)

It gives me great personal pleasure to welcome the Minister of State, Deputy Brian Hayes, to the Chamber. I had a high regard for his contribution both as a Senator and as a Deputy prior to his appointment to such a significant brief. He and I have worked closely together for several years in the light of our common concerns and commitments on behalf of the people of west Tallaght which forms part of his constituency. I know at first hand his dedication, expertise and empathy in progressing a multiplicity of issues relating to the constituency. I look forward to working with him in our new roles.

I welcome several aspects of the Bill. In particular, I am heartened that it represents a move towards evidence-based policy and law by way of the commitment to review the impact of the changes proposed. If the provisions do not bring about what is expected, they will be reviewed. That is a progressive approach.

I propose to focus on the decision of the Government to fund the jobs initiative by way of a levy of 0.6% of the market value of pension assets. Senator O'Brien has noted some of the issues that arise in this regard, but I will take a somewhat different perspective. The only existing pensioners who have pension funds are those in private sector defined benefit schemes and in private sector defined contribution schemes who have not moved into annuities or approved retirement funds. Senator Cait Keane's comments are important in this regard. This probably means that should the pension scheme trustees or administrators apply the tax levy to pensioners - I assume they could instead absorb the levy by reducing their fees or becoming more efficient, but that is unlikely - the wealthiest pensioners would escape the levy. I use the word "probably" because there may be some very wealthy pensioners in defined benefit schemes. It also is true that the pension levy does not hit the poorest pensioners, as such pensioners only receive the non-contributory State pension. However, the wealthiest pensioners also escape from the levy as they are more likely to have their funds in approved retirement funds or at least in annuities. Therefore, the pensioners this measure is most likely to hit are those in the middle with defined benefit pensions and many such pension funds already are in trouble because they are under-funded, a point to which Senator O'Brien already has referred.

Taking a social justice perspective and being attentive to and strongly supportive of the initiatives proposed to create the conditions for jobs, I believe a more equitable change to fund the jobs initiative would be the standard rating of pension contributions. In particular, this would underpin the labour market as outlined in the Minister of State's contribution and would save far more money than this levy will raise. According to data compiled by the Trinity College Dublin pension policy research group in 2007, employer contributions to occupational pension schemes on behalf of employees amounted to €1.4 billion, while the estimated cost of tax relief and the exemption from benefit in kind taxation was €150 million and €540 million, respectively. Furthermore, these tax reliefs were concentrated on the top 20% of the owners. This research group argues and I agree, that the best way to create greater pension equality among high, middle and low earners would be to give tax relief at the standard rate of tax, as is now done in the case of relief on mortgage interest and health insurance. Does the EU-IMF programme not contain a commitment to standardise pension reliefs? The Minister of State's speech noted there is a commitment to reduce the tax reliefs and does this pertain to their standardisation? The solution I put forward does not appear to increase the cost of business and the Government also has a commitment in this regard to which the Minister of State referred in his comments today. I recommend a more equitable change focused on the standard rating of pension contributions. By definition this would affect the people paying into a pension fund, namely, those who are younger, rather than those who are drawing it down, namely, those who are older.