A Government decision to boost tax relief for those with large pension pots came after warnings by the Department of Justice to a review group that failure to make changes could prompt an exodus of senior gardaí and judges.
Such a development, the department cautioned, could have implications for national security and the operation of the judiciary.
It feared high-level judges would retire early or not seek promotion to higher courts and that senior gardaí would resign leading to “potentially disastrous consequences” for filling other positions further down the force’s seniority ranks if they too, over time, were brought into the pension taxation net.
The department was worried that if the arrangements for taxing pensions worth more than €2 million continued without reforms, there was “a real prospect” that only candidates from outside the force would seek top-level command positions in An Garda Síochána.
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“From the department’s point of view, given the responsibility of the most senior gardaí for national security, it is not desirable that the pool of applicants should reduce to non-Garda officers.”
The department suspected that without change to the arrangements for taxing large pensions (known as the standard fund threshold), few, if any gardaí would apply for the post of commissioner to replace Drew Harris, who is due to retire next year.
It also believed that up to six assistant commissioners, who had written to Minister for Justice Helen McEntee, “were seriously considering ‘early’ retirement”.
In a submission to the review group, established by the Government to examine the pension tax issue, the department also expressed concern that the model for appointing experienced barristers to the judiciary could be undermined.
“The concerns for the department are: (a) the previous attractiveness of judicial office will be diluted over time, to the extent that successful senior lawyers will consider the standard fund threshold a significant impediment to applying for these positions; (b) that serving judges will not apply for promotion; and (c) that serving members retire to avoid accumulating further tax liabilities.”
It added: “The model of appointing senior qualified and experienced lawyers, that has served the State well since its foundation, could be undermined if, over time, the taxation of pension benefits were to be considered so penal that the benefit of moving from well-rewarded self-employment to the judiciary was outweighed by the tax treatment of the pension.”
Under arrangements then in place, individuals with pensions valued above €2 million faced a chargeable excess tax of 40 per cent – leaving them having to potentially pay hundreds of thousands of euro. Under reforms approved by the Government in September, retirees will be able to get tax relief on pension pots of up to €2.8 million.
Ministers signed off on a proposal from Minister for Finance Jack Chambers to gradually increase the figure by €200,000 a year until 2029, starting in 2026 and culminating in 2028.
The plan was strongly criticised by the Opposition, with Sinn Féin finance spokesman Pearse Doherty saying a large tax break had been given to people with gold plated pensions.
Mr Doherty said the Government was asking “those who work in Tesco’s or nurses or guards or firefighters or teachers to help build up the pension funds of those at the very top, to the tune of €2.8 million”. He said they could retire with the State-supported pension of €100,000 a year with a “large tax break of €320,000″.
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