Parliamentary Question addressed to the Minister for Public Expenditure and Reform

5th November 2013 - Olivia Mitchell TD

To ask the Minister for Public Expenditure and Reform if he will outline the way tax relief on pension contributions applies to post and pre 1995 public servants, listing the names of each pension contribution, the respective rates at which they apply, the way in which tax relief applies to those pension contributions; and if he will make a statement on the matter?

To ask the Minister for Public Expenditure and Reform if he will provide in tabular form the pension contributions of a pre-1995 executive officer at the final point of the increment scale must make towards their pension every year; if he will explain the way in which tax relief on pension contributions applies to their pension contributions and the way in which gross pay is affected; and if he will make a statement on the matter?

To ask the Minister for Public Expenditure and Reform if he will provide in tabular form the pension contributions of a post-1995 executive officer at the final point of the increment scale must make towards their pension every year; if he will explain the way in which tax relief on pension contributions applies to their pension contributions and the way in which gross pay is affected; and if he will make a statement on the matter?

Reply:

Questions taken together

Established Civil Servants appointed prior to 6 April 1995 are subject to a modified rate of PRSI (Class B) whereas those appointed on or after 6 April 1995 are subject to PRSI Class A rate.

Officers appointed prior to 6 April 1995 do not pay an explicit employee contribution in respect of their “Main Scheme” pension (i.e. their own personal pension).

Officers appointed on or after that date pay the following contributions:

– 1.5% of gross remuneration (i.e. basic salary plus any pensionable allowances), plus

– 3.5% of net remuneration [i.e. gross remuneration (as defined above) less twice the maximum annual rate of the State Pension (Contributory) payable by the Department of Social Protection to a single person without dependants].

In addition, all officers who are members of the Spouses’ and Children’s Contributory Pension Scheme (which was compulsory for all male officers appointed on or after 1 January 1969 and before 1st September 1984, and is compulsory for all officers appointed on or after 1st September 1984) pay contributions in respect of the benefits provided by that Scheme. The contribution rate is 1.5% of salary in respect of periods of pensionable service (e.g. they are not paid during periods of unpaid special leave, unpaid sick leave, etc.).

Contributions for members appointed before 6 April 1995 are levied on basic salary and acting up allowances only. Additional contributions have to be made at retirement if other pensionable allowances are taken into account when determining pension benefits at retirement. For members appointed on or after 6 April 1995, contributions are levied on basic salary and any pensionable emoluments in the nature of pay held from time to time during their career (irrespective of whether or not such emoluments are taken into account when determining the pension benefits at retirement).

The change of PRSI status in 1995 did not affect the position of non-Established State employees in the Civil Service. Such employees do not pay an explicit employee contribution in respect of their “Main Scheme” pension (i.e. their own personal pension). The contribution rate in respect of membership of the Spouses’ and Children’s Scheme is 1.5% of net salary [i.e. salary less twice the maximum annual rate of the State Pension (Contributory) payable to a single person without dependants].

Generally, the position in relation to Main Scheme and Spouses’ and Children’s Scheme contributions for pre and post 1995 Established Civil Servants also applies in the wider Public Service.

Income tax relief is provided on pension contributions made by both public sector and private sector employees at their marginal tax rate, subject to an annual earnings cap which operates in conjunction with age-related percentage limits. The maximum amount of annual tax-relieved pension contributions that an employee can make to pension arrangements is restricted on a graduated basis, rising from 15% of their annual earnings up to age 30 to 40% of annual earnings at age 60 and over. This is subject to an overall earnings cap of €115,000 per annum above which no relief on pension contributions as a percentage of earnings is given. The relief and the annual tax-relieved contribution limits apply across-the-board to all employees, regardless of whether they work in the public or private sectors.

Parliamentary Question addressed to the Minister for Public Expenditure and Reform

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