Róisín Shortall (Dublin North West, Labour)
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Question 83: To ask the Minister for Finance further to Parliamentary Question No. 104 of 29 April 2010, if he will clarify whether he did review the specific pension arrangements of top management within the covered institutions as recommended by the Covered Institution Remuneration Oversight Committee; and if so the outcome of that review. [21263/10]

Róisín Shortall (Dublin North West, Labour)
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Question 84: To ask the Minister for Finance his policy in respect of the practice of paying pension cash allowances to senior management in the covered institutions as identified by the Covered Institution Remuneration Oversight Committee; if he will confirm that this practice is continuing in respect of individuals in two banks (details supplied); the steps he will take to address this breach of salary cap of €500,000 and the disregard of his instruction that this practice should cease immediately; and if he will make a statement on the matter. [21264/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 83 and 84 together.

In my earlier reply of 29 April 2010 to the Deputy, to which she refers, I set out the actions taken by me in response to the recommendations of the Covered Institutions Remuneration Oversight Committee (CIROC) and also where the Government went beyond those recommendations with the introduction of a salary cap of €500,000 with any deviation from this only in exceptional circumstances and with my approval.

As I explained, it is a matter for the remuneration committees of the covered institutions to ensure that these recommendations are being adhered to; however it is possible that in some cases the remuneration committee maybe restricted because of contractual arrangements entered into with individual senior executives prior to the publication of the CIROC report. I have no legal power under the applicable legislation to force new agreements in such cases for the duration of the existing contracts.

On the issue of "pension cash payments", CIROC stated that: "We have become aware of a practice in which cash allowances were paid to compensate for the effects of the "pensions cap" imposed by the Finance Act, 2006. Pension schemes should reflect public policy and tax law and it is unacceptable that arrangements should be put in place which would be inconsistent with the intent of the relevant legislation."

I advised the Deputy in my earlier reply that I specifically informed the affected institutions that this practice should cease immediately and I have followed up to ensure that this has happened. At two of the covered institutions payments continue to be made because of pre-existing contractual arrangements to four individuals. In all cases reductions in base salary and/or the "pension cash payment" have been made.

Furthermore, last year, in the light of discussions between my Department and the Revenue Commissioners on this aspect of the Report, the matter was taken up by the Commissioners with the institutions involved, with a view to ensuring that the practices concerned are in compliance with pensions tax provisions and with tax law generally.

I understand that following the completion of the Revenue Commissioners enquiries, the Commissioners are satisfied that the practices concerned did not contravene the legislation and that the cash payments involved were made subject to the requirements of tax law.

It should be noted that a primary purpose of the limit on tax relieved pension funds introduced in Budget and Finance Act 2006, was to dissuade employers from making excessive tax relieved pension contributions on behalf of favoured employees. This was achieved by imposing a penal rate of tax on the value of pension benefits ultimately drawn down on retirement by such individuals in excess of the cap. The results of the Revenue Commissioners' enquiries would indicate that the 2006 legislation is operating as intended.

Beyond the review of the "pension cash payments" for top management, I have included the provision in the Subscription Agreements for State capital investment in the relevant covered institutions to specifically preclude any pension improvement for senior managers without prior consent. No other formal review is currently underway, but the matter will be kept under review in the light of experience.