Minister for Finance, Michael Noonan, T.D. and Minister for Public Expenditure & Reform, Brendan Howlin, T.D. delivered yesterday their fifth Budget speeches. Please see key points below in relation to life and pensions and other key measures which may impact on your financial planning:

Pension Levy
Confirmation that the pension levy of 0.15% ends in 2015 and will not apply for 2016.

Exit Tax Rates
Rate of exit tax on life assurance policies and investment funds is being maintained at 41% for 2015.

Deposit Interest Retention Tax (DIRT)
Rate of DIRT is being maintained at 41% for 2016.

Capital Acquisition Tax (CAT)
There will be a rise in the CAT Group A threshold from €225,000 to €280,000 which focuses on the transfer of assets from parents to children. This increase applies in respect of gifts or inheritances received on or after the 14^th of October. Group B and C thresholds remain unchanged.

Standard Fund Threshold
No changes were made to the Standard Fund Threshold keeping an individual’s lifetime pension fund limit at €2m without triggering an excess chargeable to higher taxation.

State Pension Increase
The State Pension is increased for the first time since 2009 by €3.00 per week.

Other key measures which may impact on your financial planning

Changes to the Universal Social Charge (USC) were announced:

Incomes of €13,000 or less are exempt. Otherwise:

€0 to €12,012 @ 1.0%

€12,013 to €18,668 @ 3.0%

€18,669 to €70,044 @ 5.5%

€70,045 to €100,000 @ 8%

PAYE income in excess of €100,000 @ 8%

Self-employed income in excess of €100,000 @ 11%

In summary, pensions continue to be the most tax-efficient way of saving for your retirement. With a 41% DIRT rate applying to interest income and a 41% exit tax applying on life assurance policies and investment funds the attractiveness of the pension savings regime is significant, given that a nil tax rate applies on investment gains once the levy expires in 2016.

If you have any queries in relation to any other aspects of the 2016 Budget, please contact us on imofs@imo.ie.

This material is not intended to provide advice and is provided for general information purposes only. The information contained herein is based on IMO Financial Services’ understanding of the changes announced in Budget 2016 and may change in the future. Further clarification of all the measures announced today will be detailed in the Finance Bill 2015 due to be published over the coming weeks.