ICTU gets tough on pension tax breaks

TAX breaks for the wealthy need to be reined in to make room for better pension incentives for low-paid workers, the Irish Congress of Trade Unions (ICTU) said yesterday.

The group also said there should be no move to force compulsory pension schemes on employers and workers.

ICTU general secretary David Begg said pensions would be top priority in the next talks on a national pay deal, but also warned that hundreds of thousands of people were “sleepwalking” into poverty in their old age by failing to wake up to their pension needs.

The ICTU published its answers to the country’s pension problems yesterday as part of National Pensions Action Week. It wants the Government to curb the tax breaks available for pensions contributions, which give people up to €42 off their tax bill for every €100 they put towards their retirement.

Mr Begg said 40% of pension-related tax breaks, which are estimated at around €1.5 billion per year, went to the top 10% of earners. Wealthy individuals could put up to 30% of their salary, up to a maximum of €254,000 per year, into a pension and receive full tax relief, said the ICTU, but this cap should be halved to allow the Government target tax relief at lower-paid workers who needed extra incentives.

The ICTU also poured cold water on potential Government plans to bring in compulsory pensions for all workers and said such a move would cause more problems than it would solve. Mr Begg said experience from Australia had shown compulsory pension schemes, where employers contributed up to 9% of an employee’s salary, had unintended effects. Many employers that had been contributing 15% or 20% of salary to schemes cut their payments after the rules were changed, leaving their employees worse off, he said.

Measures proposed by the ICTU included schemes where employers contribute 10% of salary and employees pay 6%. Existing schemes that only paid 5% or 10% of salary into a fund would not be enough and would result in “very disappointed pensioners”, said Mr Begg.

The group also dismissed the government’s Personal Retirement Savings Account (PRSA) initiative, which aimed to encourage people to take out personal pensions but has been considered largely unsuccessful, with only 51,000 accounts opened in 18 months. Mr Begg said the effect of PRSAs had been “positive but marginal” but that the Government should persist with them for the time being.

In a separate development yesterday, the Pensions Board, the agency charged by the Government with boosting pensions coverage, said employees in catering, retail, agricultural and construction jobs were especially vulnerable and needed to take action to address their retirement income. It said only one in eight workers in hotels and restaurants and one in six with agricultural jobs had a private pension in place.