An end to pension levy announced

The reduction in the controversial pension levy which has siphoned more than €2bn from private sector pensions in the past four years was universally welcomed yesterday.

Finance Minister Michael Noonan announced that a reduced charge of 0.15% would apply to private-sector pensions from the beginning of 2015, with the levy being abolished entirely at the end of next year.

The phasing out of the measure will provide savers with greater certainty and encourage additional workers to save for their retirement, according to Joyce Brennan, partner with financial services firm Mercer.

“The removal of the pension levy is a welcome move and one which will encourage more employees to commit to saving for a pension. we know from working with employers and employees that the extension of the levy proved a deterrent to pension provision — the reversal of this unfair and retrospective tax is a positive move,” she said.

Budget 2014 provided an unwelcome surprise for pension holders as Mr Noonan reneged on a commitment to abolish the levy and added 0.15% to the existing 0.6% levy that was introduced in 2011.

Yesterday, Mr Noonan defended the move by saying that the levy had allowed him to introduce the 9% hospitality Vat rate which had created thousands of jobs in the sector and protected thousands more.

In light of relatively little protest over the charge, it was feared that the minister would be tempted to retain the levy indefinitely.

Workers are likely to put up with the remaining year of the levy in the knowledge that it will then be discontinued, according to Irish Association of Pension Funds chief executive, Jerry Moriarty.

“It’s all noticeable and it racks up over time... but relative to the 0.6% and 0.75% [rates that previously applied], I think it’s something that people will live with next year in the knowledge that it will be ending and hopefully [the government] will stick by that. Next year [the value of the levy] is going to be about €135m compared to €700m this year, so it’s a fair drop,” said Mr Moriarty.

Both the IAPF chief and Ms Brennan said a solution to the wider pension issue must be found. An OECD review of the Irish pension landscape identified uneven coverage, both in occupational and personal pensions. Earlier this year, Social Protection Minister Joan Burton outlined an auto-enrolment system — MySaver — for employees who are not members of a pension scheme.

“It is critical that private pension provision is increased in Ireland. With this budget signalling a more favourable economic environment, now is the time to implement an auto-enrolment system to improve pension coverage across Ireland,” said Ms Brennan.