THE STATE has no role to play in filling the holes in private pension schemes, Taoiseach Enda Kenny has insisted in a row about the pension levy.
Fianna Fáil leader Micheál Martin accused the Taoiseach of “stitching” into the legislation on the levy a specific provision that “pensioners’ benefits could be reduced” by the levy because the schemes were in deficit.
Mr Martin claimed the Government did so at the behest of the pension industry, because he was lobbied about it. He said Aer Lingus and Dublin Airport Authority pensions would be hit by €30 million over the four years of the levy.
The 0.6 per cent annual levy was originally introduced as a temporary measure for four years to raise €1.8 billion to fund the Government’s jobs’ initiative. Mr Kenny also said the jobs initiative involved renegotiating with the IMF-EU on reduced PRSI and VAT.
During leader’s questions in the Dáil the Taoiseach said the Government inherited a pension system in crisis with a deficit of between €10 billion and €15 billion in certain private pension schemes. This was clearly identified “as the extent of the fat and costs involved in their administration”.
Mr Martin said that if the Taoiseach was “convinced about charges, fees and administrative fat, you not have given that leeway to the trustees and pension funds”.
Mr Kenny said the defined benefit schemes were entirely voluntary arrangements between employers and employees and the State’s role was to regulate the schemes to ensure employers delivered on their promises. “The State has no role to play in filling holes that have emerged in these schemes.”
The Taoiseach said there were 220,000 people in private defined benefit schemes and 260,000 in defined contribution schemes. He highlighted the study commissioned by the Minister for Social Protection with the Pensions Board and Central Bank on the level of pension charges and the expenses involved in various pension schemes.
He also pointed to reports that some pension savers were losing more than a third of their savings on certain pension products. “I regard that as a disgrace.” He said the excessive administration charges imposed by pension funds could absorb the vast majority of the temporary pension levy.
He also said that the “smallest transaction charge can have a serious impact over the lifetime of a pension”.
