The latest measures will increase the maximum benefit that can be provided for a spouse from two-thirds to 100 per cent of the full pension

The pensions landscape has changed beyond recognition under the current Minister for Finance. Most recently, Mr McCreevy announced more pensions changes to be introduced in the committee stage of the Finance Bill 2002.

The latest measures will improve the pension system for higher earners by providing greater incentives to save for retirement, and more flexibility in benefits and contributions. The proposals have been welcomed as radical and progressive by tax practitioners.

The existing tax-relief limit for employee contributions to pension schemes is 15 per cent of annual earnings.

This will be improved to mirror the tax-relief limits that apply to personal pensions.

The new limits are:

Up to age 30, 15 per cent of earnings;

Between 30 and 39, 20 per cent of earnings;

Between 40 and 49, 25 per cent of earnings.

Aged 50 years and over, 30 per cent of earnings.

Many employees seek to pay additional voluntary contributions (AVCs) beyond their standard contribution to an employer's scheme but older employees in particular have been frustrated by the 15 per cent limit.

The proposed 30 per cent limit is particularly useful to those who have started their pensions relatively late, as it enables them to catch up by boosting contributions in the final stretch.

Mr Michael Kelly, head of the pensions division at KPMG, said: "Against a background of difficult market conditions and lower annuity rates, employees can seek to recover lost ground in pensions saving."

These increased limits should be seen together with the changes introduced in Finance Act 2000 giving employees the option of transferring the value of their AVC into an approved retirement fund at retirement.

"These changes improve the position for ordinary employees in relation to the ownership of their pension savings in retirement," Mr Kelly said.

He added that investment strategy should not be overlooked.

"Each person has to decide on the investment strategy for their AVC fund and the closer you get to retirement, the more cautious you should be."

The Irish Association of Pension Funds (IAPF) joined the Pensions Board in welcoming the proposals to increase the levels of pension contributions that qualify for tax relief.

Mr Patrick Burke of the IAPF said the Minister had dealt with an unnecessary anomaly between the regime for the self-employed and those in occupational pension schemes.

"However, the rate bands differ from those envisaged for PRSAs [personal retirement savings accounts\] and the IAPF believes that this highlights a need for overall simplification of Revenue code of practice in the area of pensions."

The IAPF also welcomed positive news for spouses in the Bill. The maximum benefit that can be provided for a spouse will be increased from two-thirds of the full pension to 100 per cent if the scheme allows.

Under company schemes, the current maximum spouse's pension is two-thirds of the scheme member's full pension, with a maximum for all dependants being 100 per cent of the total member's pension.

The changes indicated by the Minister will relax these rules to allow company pension schemes to provide a spouse's/dependant's pension up to 100 per cent of the member's pension. Again these changes mirror the choices open to the self-employed.