Ruth Coppinger (Dublin West, Socialist Party)
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16. To ask the Minister for Finance if he will abolish inequitable tax reliefs in the budget such as tax relief on pension contributions at the marginal rate. [28547/14]

Michael Noonan (Limerick City, Fine Gael)
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It is not clear from the question whether the Deputy is advocating the total abolition of tax relief on pension contributions or a change in the rate of the relief which currently applies at the taxpayer's marginal income tax rate. Either way, I have no plans to change the rate of income tax relief on pension contributions. There have been a number of significant changes in the tax relief arrangements for contributions to pension savings over recent years:

- The annual earnings limit for determining (with age-related limits) the maximum allowable tax-relieved pension contributions in any one year was reduced from over €275,000 to €150,000 per annum for the tax year 2009 and was further reduced in 2011 to its current level of €115,000 (representing a reduction of over 58% in the annual earnings cap from its peak in 2008).

- From 1 January 2011, employee contributions to occupational pension schemes and other pension arrangements were made subject to employee PRSI (they were previously exempt) and were also made subject to the Universal Social Charge.

- The employer PRSI exemption in respect of employee contributions to occupational pension schemes and other pension arrangements was reduced by 50% from 1 January 2011 with the remaining 50% relief removed by Finance Act 2012 with effect from 1 January 2012.

- The maximum allowable pension fund on retirement for tax purposes (the Standard Fund Threshold or SFT) was reduced from its indexed level of over €5.4 million to €2.3 million from 7 December 2010 (equating to the scale of the reduction in the annual earnings limit described above).

- Finally, in Budget 2014 and Finance (No 2) Act 2013, in line with the commitment I made in the previous Budget to restrict the subsidisation of pensions by taxpayers to those that deliver income up to €60,000 per annum, I further reduced the SFT from €2.3 million to €2 million with effect from 1 January 2014 as well as making other changes to the SFT regime.

The primary purpose of the changes made to the SFT regime is to further restrict the capacity of higher earners to fund or accrue large pensions through tax-subsidised sources. The SFT regime addresses the problem of pension overfunding and excessive pension accrual by dealing with it at the point of pension drawdown in retirement rather than by applying restrictions to pension savings or accrual upfront. The regime achieves this by imposing a higher tax charge (effectively 65% excluding liability to USC or other charges) on the value of retirement benefits above set limits when they are drawn down. In this way it acts to discourage the building up of large pension funds in the first place or unwinds the tax advantage of such overfunding by clawing back, through the higher tax charge, the tax relief granted.