33% pension rate could save €500m

STANDARDISATION of tax relief on pensions at 33% could save the Exchequer €500 million annually, according to a report on pensions issued yesterday by the Economic and Social Research Institute (ESRI).

However, as the ESRI proposal incorporates a new benefit-in-kind (BIK) tax on the employer’s pension contribution, an intense public debate is likely to precede any changes being introduced in the National Pensions Framework early next year.

While there is a broad acceptance of the Exchequer’s need to make sizeable savings, the Irish Association of Pension Funds (IAPF) warns that the proposed BIK tax would simply cause top earners to move their money away from pensions into other types of investment.