Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

The pensions system in Ireland is composed of two main pillars. The first is the State pension system and the second involves supplementary pension arrangements provided through a variety of arrangements that are incentivised and regulated by the State. The State has historically encouraged individuals to make provision for their retirement in order to supplement the basic State pension payments to which they may be entitled. The policy of marginal rate tax relief for pension contributions is of long standing and has been a key incentive in encouraging supplementary pension provision over the years. Under this approach, individuals can obtain income tax relief at their marginal tax rate on contributions made by them, or on their behalf, to pension schemes and personal pension plans, subject to age-related percentage limits and an overall annual earnings cap.

Calls continue to emanate from various sources for changes to the marginal rate of tax relief on pension contributions, including scaled reductions in relief towards the standard rate of income tax or, indeed, the complete removal of the relief. The rationale for these proposals varies – from those who regard the relief as overly favouring the higher paid to certain advocates who consider that the supplementary pension system in general only ever serves the higher paid and that the savings that could be made from significantly reducing or abolishing reliefs in this area should be used, for example, to improve the State pension arrangements.

I have a detailed note for Senator Higgins on her recommendation. I propose to give that note to Senator Kelleher in advance of Report Stage and Senator Higgins can decide whether to resubmit the amendment at that point.

The Government is seeking to develop a universal retirement savings system. Work is ongoing on this project in the Department of Social Protection and I do not wish to pre-empt what the final shape of that system might be. However, the core target group for a universal system would be lower and middle-income earners. The Department of Finance is working with the Department of Social Protection as part of the work of the universal retirement savings group project. In the circumstances, I do not consider it would make sense to conduct a separate exercise along the lines suggested in the Senator’s recommendation in respect of marginal rate private pension tax relief. This would not represent optimum use of the Department’s resources and I cannot, therefore, accept this recommendation. I will, however, give a further detailed note to Senator Higgins in advance of Report Stage.