Pensions: The Minister for Finance concentrated on lower income taxpayers in framing pension incentives in yesterday's Finance Bill.
Mr Cowen did increase limits on the relief people close to retirement age can get on retirement contributions. Those over the age of 55 can now claim relief at their marginal income tax rate on 35 per cent of their earnings (an increase of five percentage points). People over the age of 60 will be able to claim relief on contributions of up to 40 per cent of their income, compared to 30 per cent currently.
Mr Cowen said the measure was designed to help those who left it late in their careers to begin adequately funding their pension to boost their retirement income.
However, his limited proposal of relief on money that will be transferred to a pension scheme from Special Savings Incentive Accounts (SSIAs) was poorly received by most in the pensions industry.
The Bill proposes that people currently paying tax at 20 per cent - and those paying no tax at all - will receive €1 from the Government as a bonus for every €3 they transfer from an SSIA to the pension fund. There is a €2,500 ceiling on the bonus, effectively curtailing the benefit to transfers of €7,500.
Mr Cowen has also said eligible SSIA savers availing of the scheme would receive a refund of the 23 per cent exit tax on money they transfer to a pension fund.
People with incomes of more than €50,000 will not benefit even if they pay little or no income tax.
Benefits consultant Mercer last night described the measures as "a bit of a damp squib".
"This is equivalent to tax relief of around 25 per cent and will only be of use to a small number of people," said Mercer senior consultant Joyce Brennan. "People paying tax at 20 per cent can already make additional voluntary contributions (AVCs) to a pension scheme and receive relief of 26 per cent - 20 per cent income tax and 6 per cent PRSI."
Ray McKenna, managing consultant Watson Wyatt, said the bonus scheme was positive "particularly as it is aimed at those in the lower income groups, an area where pensions savings is lowest".
"While this is a step in the right direction, we need to deliver on the recommendations of the National Pensions Review and create a simple, tax-incentivised approach to pensions to convert the savings habit created by SSIAs into meaningful retirement incomes for the population."
David Croughan, chief economist at employer group Ibec, said the measures were "a weak attempt at increasing pension coverage", though Irish Life, a major player in the pensions sector, described the initiative as "imaginative".
