‘Stop the clock on pension change’

THE clock should be stopped on further pension tax change in 2012, the Society of Actuaries in Ireland argues, saying that a comprehensive and holistic analysis of proposed changes is required.

In a position paper entitled: Taxation of Private Pension Provision, the Society of Actuaries in Ireland (SAI) says no further changes are required in the short term “given that the National Recovery Plan targets will be substantially met from measures that have already been implemented”. This targeted savings of €940 million in a full year.

“A number of measures have already been implemented in 2011 which have achieved savings of €293m, ahead of the target for 2011 of €260m.

“Further savings of well over €100m have been achieved due to a fall-off in contributions. These combined savings will recur in 2012, which means that the measures already implemented will deliver a significant part of the €485m target for 2012,” the SAI states.

The paper’s authors point out that one of the features that will help promote the adequacy of a pension system is the tax incentive provided by Government to encourage middle-income earners to save for their retirement.

“If these incentives are reduced to such an extent that individuals do not consider it worthwhile committing to long-term savings within a pension arrangement, then it is inevitable that the proportion of the working population in pension arrangements will fall from the current level of approximately 50%. This means that over half of the population will be reliant on the state pension (currently €11,976) in retirement,” the paper states.

The SAI argues that this is clearly contrary to the government’s policy of supporting a sustainable pensions system that will provide adequate and reliable pensions for retired and older people, and that achieves wide coverage.

The SAI said that if the Programme for Government proposal to limit maximum lifetime pensions to €60,000pa is enacted, this measure will, in time, result in a material and sustained reduction in the “cost” of pension tax reliefs.