Gerald Nash (Louth, Labour)
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46. To ask the Minister for Finance his views on the opinion expressed in the interim pre-budget report 2022 of the Committee on Budgetary Oversight that pension-related tax expenditures should be considered as part of the wider reform of the pension system; and if he will make a statement on the matter. [44843/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am aware of the opinion expressed by the Budget Oversight Committee on pension-related tax expenditures as set out in its Interim Pre-Budget Report 2022.

This issue is but one strand of a complex area of public policy that has been the focus of a number of initiatives, reviews and examinations over the last decade or so.

In my view, we should seek to make overall progress in the area of pensions provision in a manner that is comprehensive and surefooted. That broad approach is what has informed recent action in this area including the Roadmap for Pensions Reform 2018-2023 which, in turn, led to the work of the Interdepartmental Pensions Reform and Taxation Group and the separate work of the Pensions Commission. Indeed, the Commission on Taxation and Welfare has also been charged with considering the output from the Pensions Commission regarding sustainability and eligibility issues in respect of State Pension arrangements.

In terms of the tax treatment of supplementary pensions, Ireland operates an Exempt, Exempt, Tax (EET) system, like the majority of OECD countries. This means that contributions to pensions are exempted from income tax (subject to age-related percentage and income limitations), pension fund gains are exempted from income tax but income from pension drawdown is taxed.

The Inter-Departmental Pension Reform and Taxation Group (IDPRTG) recently reviewed the cost of funded supplementary pensions to the Exchequer. In its report published in November 2020, it noted that in common with most developed countries, fiscal support for private pension saving exists in Ireland.

It observed that in providing incentives, States are motivated by the policy objective of increasing aggregate savings or encouraging citizens to provide for their retirement, by deferring a sufficient amount of income and consumption today to provide for their later years. This is based on an assumption that individuals require an incentive to lock-up savings until they retire given that alternative saving vehicles allow on-going access.

It also noted that the tax treatment of pensions represents one of the largest Exchequer tax expenditures. However, in common with other countries operating an EET system, the exact cost of this is difficult to quantify due to the general nature of tax expenditures and also specific pension-related challenges, such as limited data availability on some features of the pension regime in Ireland.

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.