THE IRISH pension industry has warned that the Government is planning to impose a stealth tax on private pensions to fund the jobs initiative which is to be announced next week.
The Irish Association of Pension Funds said it had been briefed by officials in the Department of Finance last week that a levy of up to 0.6 per cent would be put on private pension funds for the next four years in a move which the Government hoped would raise €450 million a year.
“The Government has been saying that the levy has been agreed with the pension industry but it is not the pension industry’s money, it is the people’s money,” director of policy at the association Jerry Moriarty told The Irish Times yesterday.
“Why should people who have been prudent and diligent and done what the successive governments have advised them to do be hit with this tax? These are people’s savings that the Government is proposing to take.”
Mr Moriarty warned that the worst affected people would be some 60,000 pensioners on defined benefit schemes, and he said they could see their annual income from their pensions fall by an average of €500 if the levy is introduced.
Chief executive of the Irish Brokers Association Ciaran Phelan agreed with this assessment and said the “new tax hits those private sector workers who diligently saved their money every month over the years so that they could afford to retire”.
He said the levy was to be introduced without consultation with pension savers, and claimed it would have “a significant impact on the income of those within the private sector who’ve already retired and will even include those on paltry pensions”.
The head of broking firm IFG Ireland said the Government appeared “intent on applying special taxes to the pension funds of private sector workers while leaving the gold-plated pension benefits of Ministers and their public sector colleagues untouched”. Ray McKenna of benefits consultancy firm Towers Watson said the new measure “could seriously compromise the recovery plans recently put in place by many private sector occupational pension schemes struggling with deficits”.
He warned that it would result in average “private sector employees and potentially pensioners suffering further reductions in their pension benefits”.
He said the impact on individuals and pension schemes would depend on whether the Government removed the levy after four years, as is currently planned.
In the event that the levy remained in place “the reduction in benefits for members could be significant and possibly terminal for a number of schemes”.
