Pension top-up could benefit 500,000

Up to 500,000 special savings account holders on low incomes will be able to benefit from a new pension ‘top-up’ incentive announced by Finance Minister Brian Cowen yesterday.

The well-flagged extension of the SSIA scheme was unveiled by Mr Cowen yesterday as part of the Finance Bill. He said it was designed to encourage more people on lower incomes to transfer funds into pension schemes.

Under the scheme, the Government will give an extra €1 for every €3 transferred from SSIA accounts into pensions. It will be confined to those on the 20% tax rate or below.

The incentive will be capped to a maximum bonus of €2,500.

In addition, the Government will waive any “exit tax” holders are liable to pay when SSIA accounts reach maturity.

Mr Cowen said the initiative would cost €250 million per annum over two years, with a further e300m provision for the exit tax waiver. The Government has long considered take-up of contributory pension schemes to be too low.

In another initiative, Mr Cowen announced over-55s who have underfunded pension payments will be allowed generous terms to make up the deficit.

The greater part of yesterday’s bill concentrated on giving legislative effect to measures introduced in December’s Budget.

Despite lobbying from multinationals, Mr Cowen said the remittance basis of taxation for foreign employees would be scrapped. This allowed employees living in Ireland temporarily not to be liable to Irish tax. Companies as diverse as Microsoft and GAMA availed of this. Mr Cowen said its use was too widespread.

In a boost to the film industry, and a response to other EU countries, Mr Cowen said film relief will rise to 80% of film budgets (from 66%) and qualifying expenditure will increase from €15m to €35m.