Minister Noonan went on to say “I considered that I was in a position to make these
significant commitments on foot, among other things, of proposals in late 2012
from the pensions sector for changes to the Standard Fund Threshold (SFT)
regime, as an alternative to standard rating of pension tax relief, which it
was claimed would yield savings and tax revenues in the region of €400 million.
Pending further analysis of this claim, I included a much lower figure of €250
million in the Budget 2013 arithmetic. That analysis has since revealed
significant downside risks to the achievement of even this lower level of yield
or savings. The estimate of the yield from the changes to the SFT regime which
I announced in last week’s Budget is €120 million. These changes differ in some
respects from those proposed by the pensions sector and reflect, on legal advice,
the requirement to protect pension rights at the date of change. In addition,
valuation factors to place a value on Defined Benefit pensions for SFT purposes
will vary with the age at which the pensions are drawn down thereby improving
equity within the regime.
I would not categorise my engagement with the pensions sector on
this matter as a “deal”, in the manner suggested by the Deputy. However, the
assessment that the changes to the SFT regime required to deliver on the Budget
2013 commitment to cap taxpayer subsidies to higher value pensions would have a
considerably lower yield than originally put forward, meant that the
achievement of the overall budgetary objectives (including the continuation of
the reduced VAT rate for the tourism sector and to make provision for potential
State liabilities which may emerge from pre-existing or future pension fund
difficulties) necessitated the imposition of the additional 0.15% pension fund
levy for 2014 and 2015.”
