B of I urges SSIA style bonuses for pensions

The Government should encourage the take-up of pensions by replacing the existing tax relief on contributions with SSIA-style bonuses, Bank of Ireland said yesterday.

The bank released details of a proposed new style of pension where the Government would give people saving for retirement €1 for every €3 saved.

In a bid to promote the reinvestment of Special Saving Incentive Accounts (SSIAs), Bank of Ireland is proposing that a Government bonus of €1 for every €2 invested should apply for the first year of all policies taken out before May, 2008. Under its proposal, called the Bonus Personal Retirement Savings Account (BPRSA), this bonus would be accompanied by a waiving of the exit tax on SSIA maturities and a widening of the tax relief limits.

The pension would also allow people under the age of 40 to make two partial withdrawals, subject to exit tax, so that younger people would not be deterred from starting a pension.

Brian Forrester, managing director of Bank of Ireland Life, said PRSAs had not captured the public's imagination like SSIAs.

The bank has written to the Minister for Social and Family Affairs, Mr Brennan, outlining its proposal. Mr Brennan is today expected to give details of initiatives under consideration as part of the Pensions Board's review of pensions coverage.

As well as being easier to understand than tax relief on contributions, bonuses have the attraction of benefiting people outside the tax net.

A €1 for €3 or 25 per cent bonus is actually worth less to standard rate taxpayers than the current system, under which they receive a total of 26 per cent relief.

The bank is proposing that higher rate taxpayers could claim additional tax relief at the end of the year, but they would not receive PRSI or health levy relief.