Pensions tax relief limit to bring in €130m less than expected

Wednesday 23 October 2013 20.46
Michael Noonan said the limit on pensions tax relief will bring in just €120m - much less than expected
Michael Noonan said the limit on pensions tax relief will bring in just €120m - much less than expected

The new limit on the amount of tax relief people can get for putting money into pensions will deliver €130m less in revenue than the Government originally expected.

The disclosure has emerged in a written reply from Finance Minister Michael Noonan to Fianna Fáil's finance spokesman Michael McGrath.

In Budget 2013, the Government said it expected the changes would deliver €250m in additional tax revenue annually when introduced in 2014.

However, in his reply to Mr McGrath, Minister Noonan said the figure would be €120m.

It is understood the pensions industry had provided the Department of Finance with data that showed the yield from the introduction of the limit would by higher.

But when officials from the Department analysed the proposals they found the tax revenue it would deliver would be much lower.

At the Dublin Economic Workshop in Limerick last Friday, Minister Noonan said: "I fulfilled my side of the bargain and the industry who gave very detailed figures did not fulfil its side of the bargain so when they come back to me and deliver I will take away the (pensions) levy."

In Budget 2014 last week, Minister Noonan said the pensions levy would increase to 0.75% next year, before falling to 0.15% in 2015. It had been expected that there would be no pensions levy in 2015.

Michael McGrath said the Minister could have achieved the savings by targetting relief on "high value pensions". "Minister Noonan is now extending the levy on all people paying into pensions. That will put largest burden on those with modest pensions," he said.

It is understood the levy is also going to fund the continuing VAT reduction for the tourism industry.

Jerry Moriarty, chief executive of the Irish Association of Pension Funds, said the measures implemented by the Department of Finance were introduced in a different manner to pensions industry proposals.

He said this had the effect of diluting the impact of the measures.