A survey carried out on behalf of the Professional Insurance Brokers Association indicated that if the levy were to continue at a rate of 0.15%, the level expected to apply for next year, the average loss of savings to a worker at retirement age would be €9,500.
As part of last year’s budget, Finance Minister Michael Noonan increased the original 0.6% levy to 0.75%, and indicated the rate would fall to 0.15% for 2015.
At the current rate of 0.75%, workers would have their savings reduced by more than €36,000 by the time they retire, according to the brokers’ association report.
Chief executive Rachel Doyle called on the Government to end the levy which she described as an “easy take” as it will take workers several years to realise its full impact, adding it was both an unfair and unequitable policy.
Ms Doyle’s call was echoed by the Irish Association of Pension Funds chief executive Jerry Moriarty, who questioned the Government’s reasoning for increasing the levy in last year’s budget.
“It is essential that the original levy of 0.6% ceases this year, as previously promised. We also question the rationale for the additional levy of 0.15% announced last year. The announcement indicated the additional payment was to cover the cost of potential State liabilities which may emerge from pre-existing or future pension fund difficulties.
“No details have been provided as to what these liabilities might be or whether the funds collected will be specifically earmarked for such liabilities. In any case, it is completely inequitable to ask those with defined contribution retirement savings to make a contribution to State liabilities in defined benefit schemes.”
The survey also found that at a total of €675m, the levy has raised more than this year’s estimated property tax yield and more than the water tax would next year, while the Irish Association of Pension Funds added that €2bn would be raised in the four years of the levy — at a time when pension funds aren’t sufficient to provide adequate income in retirement.
The State levy also flies in the face of government claims that reducing the pension gap between genders; age profiles; and the public and private sectors is a priority, Mr Moriarty said.
“The levy, which only applies to private sector pensions, widens the pension gap. It will be extremely difficult to persuade people of the benefits of pension savings if the Government does not discontinue the levy. People need to know that their savings are secure.”