Revenue Commissioners have approved pension funds worth more than €600 million belonging to 76 high earners, it emerged in the Oireachtas yesterday.
A further 40 funds in excess of the €5 million threshold remain to be certificated. On the basis of the experience to date, the total pension savings of these 116 individuals could come close to €1 billion - an average of just under €8 million apiece
Q What triggered the disclosure of this infomation? One would expect high earners to be reticent about revealing such information.
A Minister for Finance Brian Cowen introduced a ceiling of €5 million on the size of pension funds able to claim tax relief in the budget last December. This was to limit the ability of high earners to claim generous relief on contributions to already substantial pension funds.
Q Why are details of these funds emerging only now?
A People with pension funds in excess of the €5 million limit were given six months from the date of the budget to notify the Revenue in writing. That gave them until early June. As it is, Revenue has not yet ruled on all cases.
Q How have people managed to salt away so much money in their executive pensions?
A Increased flexibility in pension rules introduced by former minister for finance Charlie McCreevy in 1999 made it more attractive and tax efficient for high earners to invest heavily in their pension funds.
Q Were these high earners able to beef up their funds between the date of the budget and the time they had to submit details to the Revenue?
A It appears not. In his speech, Mr Cowen stated that the move to guillotine tax relief on contributions to funds over €5 million would come into force on that budget day.
Q So how come some of these funds are so big?
A There appears to have been a widespread understanding in the business community that the use of pension savings as a tax avoidance vehicle would not be sanctioned on an open-ended basis. With the economy booming since the introduction of the McCreevy reforms, high earners had the opportunity to maximise their savings while it remained.
Q The €5 million threshold is certainly high by today's standards but will this be raised in the future?
A The Minister stipulated that the €5 million standard fund threshold would be increased annually in line with an "earnings index" published in Iris Oifigiúil.
Q Does this also apply to people with pension funds above this level?
A Yes. Even though their funds are above the standard threshold, such individuals will still benefit from index-linking.
