45126-Invest. Qual-No111

Investment in QualityThe provision of tax relief in relation to pensions reflects a validpublic policy objective to encourage people to make adequateprovision for retirement. The QNHS for the second quarter of 2002showed that only half (50.7 per cent) of those in employment had apension scheme (occupational pension or personal pension plan)other than social welfare. Pension coverage among women inemployment (44.2 per cent) was lower than men (55.4 per cent).The low coverage of pensions points to the need for policies toencourage pensions. The new personal savings retirement accounts(PSRAs) are designed to offer low cost and flexible plans to savefor retirement and may improve the situation. The figures on thedistributional pattern of tax expenditures on pensions presentedabove do not undermine the case for providing incentives forpensions, but do point to the importance of ongoing review of theextent to which the public resources committed to this area areachieving their objectives in an equitable and efficient manner.The Finance Bill 2003 makes some changes to the tax regimegoverning pensions and the tax treatment of Approved RetirementFunds (ARFs). The Bill caps the tax relief available on pensioncontributions by imposing an annual earnings cap of €254,000 toincome that qualifies for relief in respect of employee pensioncontributions. Additional voluntary contributions made byemployees prior to retirement may now only be set back one year(instead of 10 years under previous rules), unless the contribution isprovided for widows and orphans benefits, or is towards therepayment of benefits such as a marriage gratuity.An ARF is an alternative to investing a pension fund in annuity orretirement. The income or gains made by an ARF remain tax freeuntil a withdrawal is made. Arms length rules are being introducedby the Finance Bill to prevent investments in assets for personal useor benefit. Otherwise, there are no restrictions on the investmentsthat can be made by ARFs.7.3.3 Corporation TaxUntil recently corporation tax was based on a dual structure with alower rate for enterprises in manufacturing and internationally302