Don’t cut tax breaks: IAPF

CUTTING tax breaks for pensions would be a “major blow” and would put 750,000 people off saving for their retirement, the country’s top pension fund managers said yesterday.

The Irish Association of Pension Funds (IAPF) said last week’s recommendations by a leading Government think-tank failed to take account of the true pensions picture and should not be implemented.

The Economic and Social Research Institute (ESRI) said last week that the system of tax breaks for people who put money into private pension plans was unfair and called on the Government to review its policy.

It claimed the government spent €1.5 billion every year on tax breaks for pension contributions, which was almost as much as it paid out in State pensions.

But the IAPF said the ESRI analysis failed to recognise the benefits to the State that came from encouraging greater pension take-up.

IAPF benefits committee chairman Paul O’Brien said many people were not saving enough for their retirement, even allowing for the current tax incentives, which give people up to €42 off their tax bill for every €100 they put into a pension scheme.

Mr O’Brien said it was wrong to compare the cost of the tax break with the current annual pension bill. The Government should instead look at the tax break in relation to the amount each employee would eventually cost the State when they retired, he said.

The IAPF also said the tax breaks for pensions would eventually be paid back to the State, because each pension holder would be taxed on post-retirement income. “The figure of €1.5 billion in tax reliefs granted to contributions to private pension schemes largely represents a deferral of tax, rather than a total giveaway, and cannot be compared with the one-year cash cost of State pensions of €1.6 billion,” Mr O’Brien said.