Revenue allows high earners to ring-fence pensions

Fri, Dec 23, 2011, 00:00

MORE THAN 800 high earners have secured sanction from Revenue that ring-fences pension funds of more than €2.3 million from higher taxation.

Anyone with a pension pot above € 2.3 million in December 2010, when the measure was announced in the budget by former minister for finance Brian Lenihan, was given until June last to apply to Revenue for a “personal fund threshold”.

In the event, 1,200 applications were received, some after the deadline, and 717 were approved, according to the tax authorities.

The figures are well below initial industry projections, which suggested as many as 6,000 high earners could be affected by the measure.

According to Revenue, the Government issued just 110 personal fund threshold certificates when the cap on pensions was introduced in 2005.

At that time, the cap was € 5 million. Adjusted for inflation, this had risen by 2008 to € 5.42 million.

The Government has put a temporary halt to moves to further restrict private pensions.

But Minister for Finance Michael Noonan – who had previously introduced a four-year levy on pension funds to fund the Government’s jobs programme – said the incentive regime for supplementary pension provision “will have to be reformed to make the system sustainable and more equitable over the long term”.

“My department and the Revenue Commissioners will work with the various stakeholders in the next year to develop workable solutions,” the Minister added.

If all applicants are ultimately accepted, 1,300 people in the State will have pension funds in excess of € 2.3 million.