Richard Bruton (Dublin North Central, Fine Gael)
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Question 234: To ask the Minister for Finance the reason he confines additional voluntary contributions to the existing pension scheme of an employee, when no such restrictions apply to the self employed, and when contributions to other schemes will promote competition within the pension providers. [8033/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Where employers offer pension benefits to employees, these are known as occupational pension schemes. However, even in employments where there is a pension scheme, this may not provide to all employees — whether because of the terms of the scheme or the service history of the employees — the maximum pension benefits allowed by the Revenue Commissioners, that is, a pension of two thirds of final salary and so on. If this is the case, an employee may, depending on the rules of the scheme, top up the occupational pension benefits by paying what are known as additional voluntary contributions, AVCs. An employee can contribute, as between contributions to the occupational pension scheme and AVCs, 15-30% of salary, depending on age, and claim full tax relief, subject to an overall annual earnings cap of €254,000. The additional benefits arising from these contributions may not exceed the maximum benefits permissible.

Although the law does not require occupational pension schemes to allow AVCs, the Pensions Amendment Act 2002 requires, with effect from 15 September 2003, any employer whose employee pension arrangements do not include an AVC facility to offer access to at least one standard personal retirement savings account, PRSA, to be used for AVC purposes, that is, the topping up of the pension benefits.

Even if an AVC facility is provided under the rules of an employer's occupational pension scheme, an employee may still make AVC contributions independently through a PRSA scheme approved by Revenue. It is be the responsibility of the PRSA provider in such a scenario to advise the trustees of the main pension scheme of the relevant details of members who make AVC PRSA contributions and to ensure that the overall pension benefits do not exceed the maximum benefits permissible.

With regard to pensions for the self employed, these personal pensions can either be a PRSA or a retirement annuity contract, RAC. Individuals can contribute 15%-30% of their relevant earnings into a personal pension and claim full tax relief, subject to an overall annual earnings cap of €254,000.