Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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41. To ask the Minister for Finance if he will provide in tabular form the costs of tax and PRSI relief for private pension provision for the years 2006 to date in 2013. [53234/13]

Michael Noonan (Limerick City, Fine Gael)
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The following tables provide a breakdown of the estimated cost of tax and PRSI reliefs relating to private pension contributions for 2006, 2007, 2008, 2009 and 2010, the latest year for which the most up-to-date data is available. Figures of the numbers availing of the tax reliefs are also provided, where available. Tax relief on employee or individual contributions is allowed at the taxpayer's marginal rate of tax subject to limits based on annual earnings and age. Figures have been rounded where appropriate. I am advised by the Revenue Commissioners that while corresponding updates of the figures are not yet available for the tax year 2011 the necessary work of assembling the basic data to enable this to be done is ongoing. No data is yet available for 2012 or 2013.

Finally, it should be borne in mind that the information imparted by the costing of tax and other reliefs in the pensions area is inherently limited. It may suggest a significant notional loss in terms of tax foregone as compared with the savings that might be expected if the tax relief was not available. However, where tax relief arrangements are of such significance, as in this instance, the removal of the reliefs would represent a fundamental adjustment to the current balance of the tax system and would have very significant implications in terms, among other things, of the economic and behavioural impacts which would ensue. These impacts would be difficult to model in advance. For these reasons, the real informational content of the costings of tax reliefs is limited and should be treated with some caution.

2006

2007

2008

2009

2010

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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42. To ask the Minister for Finance if he will estimate the cost of tax and PRSI relief for approved retirement funds from 2006 to date in 2013. [53235/13]

Michael Noonan (Limerick City, Fine Gael)
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Approved Retirement Funds (ARFs) form part of the regime of flexible options on retirement first introduced in 1999. ARFs are not pension schemes per se. They are investment options into which the proceeds of certain pension arrangements can be invested on retirement. Under the "ARF option", individuals are entitled to take their retirement lump sum and, with the balance of their pension fund, purchase an annuity, invest in an ARF or take the balance in cash subject to tax. Where the ARF route is chosen, beneficial ownership of the assets in the ARF vests in the individual.

Electing to invest in an ARF or to receive the balance of a pension fund in cash are subject to conditions. The conditions include the requirements that the individual be over 75 years of age or, if younger, that the individual has a guaranteed level of pension income ("specified income") actually in payment for life at the time the option is exercised. The Finance Act 2013 provided for a specified income limit of €12,700 per annum. This was a reduction from the limit provided for in Finance Act 2011 of 1.5 times the maximum annual rate of the State Pension (Contributory), which had been a limit of €18,000.

While any investment income or capital gains arising are exempt from tax while the funds are invested in the ARF, I should point out that sums withdrawn or deemed to be withdrawn from an ARF are subject to tax at the individual ARF-owner's marginal income tax rate. The 2006 Budget and Finance Act introduced an imputed or notional distribution of 3% of the value of the assets in an ARF on 31 December each year, which notional amount is taxed at the ARF owner's marginal income tax rate. This measure was introduced because the internal review of tax relief for pensions provision undertaken by the Department of Finance and the Revenue Commissioners in 2005 found that the ARF option was largely not being used, as intended, to fund an income stream in retirement but, in certain cases, was being used to build up substantial funds in a tax-free environment over the long-term. The imputed distribution measure is designed to encourage the use of ARFs, as intended, in the way of actual draw downs being made which are subject to tax.

The annual imputed distribution of ARF assets was increased from 3% to 5% in Budget and Finance Act 2011 in respect of asset values as at 31 December 2010 and future years. It was further increased from 5% to 6% for ARFs with asset values in excess of €2 million at 31 December 2012 and future years. I am informed by the Revenue Commissioners that, based on returns made by Qualifying Fund Managers, the yield from the taxation of the annual imputed distribution of ARF assets for the years 2007 to 2012 is as follows.

Yield from the taxation of the annual imputed distribution of ARF assets 2007 – 2012