Kathleen Lynch (Cork North Central, Labour)
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Question 52: To ask the Minister for Finance his plans to adjust the tax treatment of pension contributions in respect of company directors; and if he will make a statement on the matter. [38811/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In Budget 2009, I announced a significant reduction in the annual earnings limit for tax relieved pension contributions from just over €275,000 to €150,000. This reduced limit will apply for 2009 to all individuals contributing to private pension arrangements. The annual earnings cap acts, in conjunction with age-related percentage limits, to determine the value of pension contributions on which an individual taxpayer will get tax relief at his/her marginal income tax rate in any year.

The reduction in the annual earnings cap to €150,000 next year will result in a significant fall in the maximum value of tax relief that high earners can obtain on contributions to private pension provision. This change was made to promote greater equity in this area.

Apart from the annual limits on the amount of tax relieved contributions that can be made to pension funds, the maximum allowable pension fund that an individual can draw upon in their lifetime from tax relieved pension arrangements, known as the standard fund threshold, also acts to restrict the build-up of tax relieved pension benefits. In that regard, in a further policy change introduced in Budget 2009, the indexation of the standard fund threshold in line with an earnings index will not be undertaken in 2009. This will reduce the ability of higher earners to grow their pension funds through tax-relieved pension contributions.