PENSIONS:TAX RELIEF on pension contributions was further curbed in yesterday's Budget as part of a package of measures designed to limit reliefs available for high earners.
From next year, the earnings limit on which full tax relief will be available will fall to €150,000 from the previous threshold of €275,000.
Minister for Finance Brian Lenihan said: "The Government is concerned that some of the more expensive tax reliefs, especially for the better off, should be scaled back . . . It is fair and reasonable that those who profited most from the recent good economic times should shoulder a commensurate burden."
The measure was one of a number mooted ahead of the Budget. However, the Minister decided against more drastic measures, including restricting tax relief on pension contributions to the standard 20 per cent rate. "This represents a very significant change and, when combined with the scale of the losses being borne by most pension schemes over the last 10 months, businesses and individuals alike will need to review their pension positions urgently," said PricewaterhouseCoopers senior tax partner Colm Kelly.
Liam Quigley, senior consultant with Mercer, said that, in light of some of the approaches mooted, the Minister's announcement was, "by a wide margin, the lesser evil".
"We would never be happy at moves to curb relief on pensions because any reliefs that are given on pension contributions will be recouped in income tax when pensions are drawn down - particularly for higher earners - but, in the context of what might have happened, this was a relatively benign measure," Mr Quigley said.
Ian Mitchell of Deloitte Pensions and Investments said the move would disadvantage the self-employed and those who have delayed pension planning.
