Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

Question 85: To ask the Minister for Finance if he will respond to correspondence from a person (details supplied) in relation to pension contributions in the public and private sector. [47297/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

The details supplied with the Deputy's question raise a number of separate issues.

Firstly, as regards the annual earnings limit for tax-relieved pension contributions, I should explain that, in Budget 2009, I announced a significant reduction in that annual limit from just over €275,000 to €150,000. This reduced limit will apply for 2009 to all individuals contributing to supplementary pension arrangements whether those individuals work in the private sector or the public sector. 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.

This change is targeted at higher earners and the reduction in the annual earnings cap to €150,000 will result in a significant fall in the maximum value of tax relief that higher earners can obtain on contributions to supplementary pension provision. This change was made to promote greater equity in this area.

The details supplied with the question also make reference to increases in public sector pension payments. Total expenditure on public service pensions in 2007 was €2.3 billion and is increasing, arising from the growth in public service employment in recent years and from increasing longevity.

Measures to contain the cost of this increase in public service pensions have been put in place in recent years and policy options for further reform are outlined in the Green Paper on Pensions. These policy options are now being examined in the context of preparing a framework for comprehensively addressing the pension agenda over the long term.