The tax incentive introduced in this year’s Finance Act provides that for each EUR3 of SSIA funds invested in a pension product, the Exchequer will contribute an additional EUR1 up to a maximum of EUR2,500, as well as a proportion of the exit tax deducted from the SSIA on maturity.

The Finance Minister was prompted to comment on the matter by recent suggestions that SSIA holders who are already retired could transfer matured SSIA funds into a savings product, claim the SSIA tax credit and withdraw the topped-up amount immediately.

However, the pension products into which SSIA funds can be transferred would not, in the normal course, allow access to benefits until normal retirement age (generally 65) in the case of occupational pension schemes or, in the case of personal pension products such as PRSAs, until the individual reaches 60.

The Minister explained that:

“The Government is seeking through the SSIA tax credit incentive to encourage genuine long-term saving for pension provision. I would not regard as genuine any product offered to an individual which carries the SSIA top-up incentive and which can then be refunded immediately. The SSIA funds transferred to a pension product should remain there for at least 12 months if the transaction is to be regarded as appropriate for the purpose of the tax credit concession.”

Accordingly, Mr Cowen announced that he will introduce legislation at the earliest appropriate opportunity to ensure that, with effect from September 29, individuals who avail of the Pension Incentive Tax Credit only to withdraw the funds immediately or within 1 year will not get the benefit of the new initiative.