Financial services giant Standard Life has said that if the current Government carries out its previously mooted plan of reducing the relevant tax relief from 41% to 20% in this December’s Budget, the cost of funding for private savers will increase by as much as 57% compared to the previous year.
The company also said that Fine Gael should follow up on its pre-election suggestion of imposing a 0.6% levy on public sector pensions — in addition to private sector schemes — in order to make them more affordable.
“To avoid further exacerbating funding the nation’s pensions time bomb and putting huge pressure on the Government to increase state pensions in the future, income tax relief at 41% must be maintained,” Standard Life Ireland chief executive, Nigel Dunne said.
Mr Dunne added that it is not acceptable that one section of society becomes “relatively wealthy” in retirement at the expense of the other’s “relative impoverishment”; adding that the 0.6% levy would be a start.
“The estimated amount raised would be €46m but, importantly, would provide reassurance that the public and private sectors are treated more fairly. We mustn’t overlook the principles of fairness for the sake of convenience.”
The 2010 annual report from the Comptroller & Auditor General showed that the accrued costs of public service pensions amounts to €129 billion. There are around 380,000 public servants on the national payroll; while the private sector workforce is nearer 800,000, with a pension cost of €2bn, or so.
“The national bailout figure of €85bn pales by comparison with the national liability of outstanding public sector pensions. This enormous number has been overlooked for far too long and must be tackled.
“It’s breathtaking that the Government deems it fitting to force the private sector to pay for lavish public sector pensions for themselves, whilst preventing them from savings towards such a pension for themselves,” Mr Dunne said.
The Irish Brokers Association was quick to support Standard Life’s theory, yesterday, its chief executive, Ciaran Phelan saying: “People in the private sector face a difficult retirement to say the least and the Government should be encouraging people to save towards their own retirement and not be reliant on the state.
“Tax relief is what makes pension funding affordable and must be retained at the marginal rate.”