Richard Bruton (Dublin North Central, Fine Gael)
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Question 76: To ask the Minister for Finance if he will consider introducing modifications to the pension scheme of a company (details supplied) to enable persons who have contributed to this scheme for a period of 40 years to cease paying contributions. [14470/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Minister for Transport has primary responsibility for matters relating to the company in question, including its pension schemes. With regard to pension arrangements, the administration of the schemes and proposals for amendment to the schemes are a matter for the company and its pension committee in the first instance. The relevant legislation requires that any amendments to the schemes be approved by the Minister for Transport, after consultation with the Minister for Finance. I am not aware of any such proposal to amend the schemes having been made. On a point of information, I can inform the Deputy that most defined benefit schemes require continued contributions from employees even where the maximum service has been accrued.

Noel Ahern (Dublin North West, Fianna Fail)
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Question 77: To ask the Minister for Finance the position regarding payments into pension funds by high net worth persons; if a limit has been imposed in relation to the amount invested per year or in total; his views on whether the current system is unfair to persons paying tax at the 20% rate; the measures that have been introduced or are proposed to limit the advantage received by persons on the 41% rate; the claw back that has been introduced; if reference to 8% tax and benefit of 33% savings will be clarified; and if he will make a statement on the matter. [14472/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Following the Review of Tax Relief for Pensions Provision carried out jointly by my Department and the Revenue Commissioners in 2005, as part of the Internal Reviews of certain tax schemes, a number of significant changes were made to pensions tax policy in the 2006 Budget and Finance Act. These changes impacted primarily on high net worth individuals.

The most significant of the changes was the imposition of a maximum allowable pension fund on retirement for tax purposes. It works by imposing a limit or ceiling on the total capital value of pension benefits that an individual can draw in their lifetime from tax-relieved pension products, where those benefits come into payment for the first time on or after 7 December 2005. This limit, called the Standard Fund Threshold, was originally set at €5 million and was increased in line with an indexation factor in 2007 and 2008 to its current value of just over €5.4 million. No index-linked increase was applied for 2009. In certain circumstances, a higher threshold called the "personal fund threshold" could apply. By imposing a punitive tax rate on benefits drawn in excess of the limit, it discourages the build-up of excessive tax relieved pension funds in the first place, which was one of the main concerns raised in the Review.

The second significant change was the imposition of a limit on lump sum payments that can be made tax-free under various pension arrangements. At present, where lower limits do not apply, the maximum lifetime tax-free lump sum that can be payable is an amount not exceeding 25% of the Standard Fund Threshold mentioned earlier. Any balance of a lump sum greater than 25% of the Standard Fund Threshold is liable to tax at the individual's marginal rate of income tax. In that regard, I stated in my 2010 Budget Speech, that I accept the Commission on Taxation recommendation that retirement lump sums below €200,000 should not be taxed. The treatment of lump sum payments above this level will be considered and developed during the implementation phase of the recently published National Pensions Framework.

In Finance (No. 2) Act 2008, the earnings limit that acts, in conjunction with the age related percentage limits, to restrict the amount of tax relieved pension contributions that can be made by individuals in any year, was reduced to €150,000 from the previous level of just over €275,000. As with the overall limit on tax-relieved pension funds and the maximum tax-free lump sum, this restriction also impacts on those on higher earnings.

The Government agreed, in the revised Programme for Government, that a new pension savings incentive will be set at a rate equivalent to 33% tax relief rather than the existing marginal rate relief. This commitment is now included in the National Pensions Framework. The Framework also makes clear that PRSI and Health Levy relief on pension contributions will be in addition to the 33% rate of tax relief and the mechanism for delivering this relief will also be developed during the implementation phase of the Framework. Overall, I consider this to be a very significant change that, when implemented, will provide a very strong incentive for individual contributions to pension schemes and greatly improve the attractiveness of pension saving for the lower paid.