Changing marginal rate tax relief on pensions ‘detrimental’ to savings

Any change to the marginal rate tax relief in next month’s budget would be hugely detrimental to attempts to encourage people to save for retirement as it would introduce a disincentive to save, according to one leading body.

Changing marginal rate tax relief on pensions ‘detrimental’ to savings

In its pre-budget submission published yesterday, industry representative the Irish Association of Pension Funds (IAPF) urged the Government to bring stability to the pensions sector and keep the motivation of saving for one’s retirement core to any decisions it makes.

The IAPF said that last year’s budgetary statement — saying that tax relief on pension contributions would remain at the marginal rate and the pensions levy wouldn’tbe renewed after 2014 — have been key incentives for pension savers.

“The pensions’ levy, by the time it concludes in 2014, will have taken almost €2bn from the total pension savings of €80bn.

“That has been levied at a time when the biggest pensions issue facing the country is that not enough people are saving enough for their retirement,” according to IAPF chief executive Jerry Moriarty.

“In last year’s budget, the minister brought confidence to the pensions sector by highlighting the need to encourage as many citizens as possible to continue to save for retirement.

“We strongly hope that this commitment to pensions will be held to in this year’s budget and that even further strides will be taken to strengthen and develop the sector,” he added.

The IAPF wants the state pension maintained at its current level — calling it the foundation stone of the pension system — and the timing of the re-establishment of the link between it and price inflation communicated.

It also wants the pension system simplified, saying there are currently many “technical inconsistencies” in the tax treatment of different pension savings vehicles that need addressing.

“We need to simplify the pension system and ensure that the same rules apply to the differing means of saving for retirement,” the association said.

It added that tax relief on pension contributions (due from next January, to only subsidise schemes that deliver income up to €60,000 per year) should be implemented in a manner that has minimal impact on employment and economic growth objectives.

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