Seán Canney (Galway East, Independent)
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197. To ask the Minister for Finance if he will consider introducing a tax relief scheme to allow early drawdown of a personal pension to fund the installation of microgeneration projects in private dwellings; and if he will make a statement on the matter. [58310/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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The main purpose of a pension fund is to provide a secure income in retirement for the pension beneficiary. The purpose of providing tax relief for pension contributions is to encourage saving - by employers, employees and the self-employed - towards retirement income. Any early drawdowns from a pension fund, for any purpose, would reduce the pension savings from which individuals could provide for their retirement, with smaller pension schemes losing a larger proportion of their overall savings.

While the Deputy is suggesting that early drawdown of pension funds be allowed in certain defined circumstances, to fund the installation of microgeneration projects in private dwellings, it is not clear whether it would be intended that the drawdown to be available from all pension products or only certain products.

As an exceptional measure, with a view of relieving hardship during the financial crisis early drawdown from pension funds was permitted. However, it was for a limited period of time and early drawdown was confined to only one type of pension product - additional voluntary contributions (AVCs). Section 782A Taxes Consolidation Act 1997 provided members of occupational pension schemes with a three-year period, from 27 March 2013 to 26 March 2016, during which they could draw down, on a once-off basis, up to 30% of the accumulated value of their AVCs. The amount drawn down was subject to income tax under Schedule E, PRSI and USC, which was collected under the PAYE system.

Ireland operates what is described as an “Exempt – Exempt – Taxed” or “EET” pension regime. Contributions to a pension fund are relieved from tax and growth in these funds are also accumulated on a tax-free basis. Payments out of the fund during retirement are then subject to income tax, and USC and PRSI where applicable. The introduction of a tax relief scheme to allow early drawdown of pension funds could undermine the integrity of the “EET” regime. Therefore, I do not have any plans to introduce such a measure.

Finally, as the Deputy will be aware, in Finance Bill 2021 I have included a provision for a tax disregard in respect of personal income received by households who sell residual electricity that they generate back to the grid. The amount of the disregard will be set at €200. This figure should ensure that most will pay no tax on income from this source. The measure will operate for an initial period of three years with a sunset clause applying at the end of 2024.