Written answers
Wednesday, 17 October 2007
Department of Finance
Pension Provisions
9:00 pm
Róisín Shortall (Dublin North West, Labour)
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Question 176: To ask the Tánaiste and Minister for Finance the cost to the State of tax expenditures on supplementary pension schemes in each of the years this century with a breakdown of the benefit to employees, employers, self-employed, pension fund returns, retirement annuity premiums and so on in each of these years. [24309/07]
Brian Cowen (Laois-Offaly, Fianna Fail)
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As part of the work on the Green Paper on Pensions, a review was carried out of the current regime of incentives for supplementary pension provision with a view to developing more comprehensive and reliable estimates of the cost of reliefs in this area. The review examined, among other things, the current reliefs and incentives for investment in supplementary pensions and the data available on which to base reliable estimates of the costs in revenue foregone to the Exchequer.
The review also drew on newly available 2006 aggregate data on contributions to pension schemes by employers and employees arising from a P35 initiative introduced on foot of provisions that were included in Finance Act 2004 with a view to improving data quality. Arising from the review, the following estimates of the cost of tax and other reliefs for private pension provision for 2006 have been made. Further work will be necessary to provide similar estimates for 2005 and this is ongoing. As similar data sources would not be available for previous years, it is not possible to provide costings on a similar basis for those years.
| Estimate of the cost of tax and PRSI reliefs for private pension provision 2006 | |
| Estimated costs €million | |
| Employees' Contributions to approved Superannuation Schemes | 540 |
| Employers' Contributions to approved Superannuation Schemes | 120 |
| Estimated cost of exemption of employers' contributions from employee BIK | 510 |
| Exemption of investment income and gains of approved Superannuation Funds | 1,200 |
| Retirement Annuity Contracts (RACs) | 380 |
| Personal Retirement Savings Accounts (PRSAs) | 120 |
| Estimated cost of tax relief on "tax-free" lump sum payments | 130 |
| Estimated cost of PRSI and Health Levy relief on employee and employer contributions | 220 |
| Gross cost of tax relief | 3,220 |
| Estimated tax yield from payment of pension benefits | 320 |
| Net cost of tax relief | 2,900 |
The breakdown and make-up of the estimated cost of reliefs set out in the table of 2006 estimated costs differ from presentations of costs in this area for previous years in a number of respects and are not directly comparable. For further details on the cost of tax and other reliefs and the changes in the methodology, I would refer the Deputy to pages 106 and 107 of the Green Paper on Pensions which is being published today and which is available at www.pensionsgreenpaper.ie.
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