Private pension holders to bear the cost of new levy

PRIVATE pension holders will bear the cost of the controversial new levy after Finance Minister Michael Noonan gave the green light to fund managers to pass on the charge to customers.

The complicated legislation giving effect to measures announced in the Jobs Initiative was published yesterday, outlining details of the 0.6% pension levy which the Government believes will raise €1.9 billion to fund its employment plan.

Defending the tax in the Dáil last week, Taoiseach Enda Kenny said: “This is not a tax on any individual pension, it is a levy on the funds.”

But the Finance Bill states that the tax is chargeable on the assets held by the pension pot “and any benefits payable under the scheme may be adjusted accordingly.”

A spokesperson for the Department of Finance confirmed that “it’s up to the manager of the fund how the levy will apply.”

The tax will last up until the end of 2014, based on the assets held on funds on January 1, except for this year when it is applied on assets held yesterday.

Financial advisers have warned that the Government’s target of €470 million a year from retirement funds would wipe out savings, while the Irish Association of Pension Funds said it was “grossly inequitable.”

But Mr Noonan accused the pension industry of acting in a “quasi-hysterical manner” and insisted the effects on funds had been “exaggerated”. He said a “very small portion” of the tax relief enjoyed by the industry over the years was being pulled back.

The bill, expected to be passed by the Dáil before June 15, does not contain changes to the tax treatment of civil partners as had been expected.

The original Finance Bill giving legal effect to the measures of the budget was rushed through the Dáil ahead of the collapse of the previous government in February and it was envisaged that time would be given to the drafting of a Finance II Bill containing tax implications of the Civil Partnership Bill.

But a spokesperson said more time is needed to draft the laws, likely to be contained in a Finance III Bill in the coming weeks.