Dáil Éireann Debate, Tuesday - 1 July 2025
278. Deputy John Lahart asked the Minister for Finance if there are plans to harmonise pension tax relief so that the State contribution under AE is equivalent to the tax relief which people get on private pensions; if so, whether the harmonisation plans upwards or downwards; what other details can be provided on the plans; and if he will make a statement on the matter. [36061/25]
View answerThe introduction of the Automatic Enrolment Retirement Savings System, known as AE, is a landmark reform designed to get people to save for their retirement earlier thereby helping them to sustain a reasonable standard of living in their old age. It is also designed to support the long-term sustainability of the pension system more generally.
As the Deputy is aware the operation of AE is a matter for the Minister for Social Protection. However responsible for taxation policy including for the AE scheme lies with me as Minister for Finance and the legislation governing the taxation element of AE was provided for in Finance Act 2024.
My Department and Revenue worked closely with the Department of Social Protection to prepare these legislative provisions governing the taxation treatment of Auto Enrolment savings. As agreed by Government, the approach is to align as much as possible with the taxation of Personal Retirement Savings Accounts (PRSAs), other than for employee contributions.
Therefore the key distinction between the AE scheme and the “Exempt-Exempt Taxed” (EET) system of pension taxation provided to PRSAs and other pensions, in line with the approach agreed by Government, is that participants in the AE scheme will not be eligible for tax relief for their individual AE contributions. Instead, participants will benefit from a State “top-up” directly to their AE accounts. AE participants will benefit from a State top up of €1 for every €3 they contribute. In contrast under the EET system, tax relief on contributions is available at the individuals’ marginal rate of income tax.
I do not intend at this time to introduce arrangements to amend the current tax relief system for pensions contributions, which is a well-established system. The current tax relief for contributions will continue to apply for those making private and occupational pension contributions outside the AE system. As with all taxation, the provisions applying to AE and supplementary pensions remain under review and will continue to do so as the AE scheme becomes operational.
