Jack Chambers (Dublin West, Fianna Fail) | Oireachtas source

I thank Senator Higgins for her contribution. I also welcome all the students who are here from Cork. I am familiar with their school. I played sport against their school some years ago. I think we won down in Cork, they will be glad to know. They are very welcome.

Senator Higgins referred to the cost of the changes and the SFT in the context of the decision points we have taken. We published those costs in parliamentary questions and set out the trajectory of the costs as part of wider public information that we published. Some of what she raised relates to broader pensions policy with the Department of Social Protection and what the State is trying to do to bridge some of the issues. This Government has sought to address some of those wider points around the interaction between decisions I take in the Finance Bill and wider pensions policy which is co-ordinated by the Minister for Social Protection and the need for both to work together.

On the marginal rate, the interdepartmental pension reform and taxation group reviewed the cost of funded supplementary pensions to the Exchequer. Its report published in November 2020 noted:

In common with most developed countries, fiscal support for private pension saving exists in Ireland. This support is provided by way of tax relief and its inclusion in the tax code predates the foundation of the State. In providing incentives, states are motivated by the policy objective of increasing aggregate savings or encouraging citizens to provide for their retirement, by deferring a sufficient amount of income and consumption today to provide for their later years. This is based on an assumption that individuals require an incentive to lock-up savings until they retire given that alternative saving vehicles allow on-going access.

The Commission on Taxation and Welfare considered inter alia the area of pensions and in particular tax relief on pensions. Its report, published in September 2022, included a number of recommendations in the area of pension tax relief. It examined the issue of marginal relief to which the Senator referred. It considered potential changes to the existing marginal relief approach, including through potentially allowing all contributors to access the same level of relief at the higher, lower or standard mid-point rate. The commission concluded that on balance, the existing approach of marginal relief was appropriate on the basis that such contributions represent a deferral of income. If the marginal-rate tax relief on pension contributions was to be reduced to the standard rate while maintaining the current total earnings limit, that is, the maximum amount of earnings that can be taken into account for the purpose of calculating the relief of €115,000 per year, the yield would be €684 million.

The Senator raised some points about overall tax expenditure and the evaluation undertaken by the Department.As part of my budget day announcements, I have set out the current iteration that is going to progress in future. We have guidance from 2014 published with several enhancements. The updated guidelines seek to ensure that Ireland’s approach to tax expenditure evaluation, including the evaluation of tax expenditure on pensions, remains in line with international best practice, while accounting for effective evaluation and the necessary allocation of resources in the Department. In particular, these guidelines now incorporate equality and green budgeting objectives into their criteria, from what I set out on budget day, with the aim of promoting a much more comprehensive assessment across a range of evaluation criteria. That will be happening in the context of the tax expenditure relating to pensions policy, which is important. This is something the Department is advancing and that I set out in the updated guidance we published on budget day.