Private pension levy hits workers for €2.39bn

The Government hit workers’ private pensions for close to €2.4bn over a five- year period through its much-maligned pension levy, new figures reveal.

Since its introduction by Finance Minister Michael Noonan in 2011, the levy has faced fierce criticism which continued into this year when it again surpassed Government expectations, taking more from workers than initially anticipated.

The Government enjoyed a €34m additional windfall this year as receipts from the levy amounted to €169m; comfortably surpassing the €135m it was anticipated to deliver.

The situation is a repeat of last year, when the levy resulted in an extra €68m filling government coffers than had been expected.

The measure, which Mr Noonan has repeatedly said was introduced to fund jobs initiatives such as the reduced 9% hospitality sector Vat rate and job activation schemes like Jobbridge, outraged workers when it was continued into this year.

Introducing the levy in 2011, Mr Noonan said “the legislation… makes clear it is for a temporary four-year period only”.

The first three years of the levy saw a 0.6% rate in effect which was then increased to 0.75% in 2014.

Last year’s budget saw the rate decreased to 0.15% for 2015, while Budget 2016 confirmed its abolition from the end of this year.

New figures show the total amount taken by government levy since 2011 comes to €2.393bn.

The figures were released to Fianna Fáil finance spokesman Michael McGrath, who labelled the extension of the levy into 2015 as “a betrayal” of the Government’s claims that it would draw a line under the scheme at the end of the previous year, and added that it had exacerbated existing problems in the pension sector.

“The Government has presided over a disastrous pension strategy, failing to increase the level of pension coverage and raiding the savings of those who have put money aside for their retirement,” said Mr McGrath.

“The raid on private pensions has added to the difficulties of many pension schemes already struggling to pay the benefits pensioners are entitled to.

“Hundreds of defined benefits schemes have either closed to new members or have been shut entirely. The continuation of the levy into 2015 has made a bad situation even worse.”

Mr Noonan previously said that he does not consider the levy to be a principal reason for poor pension provision among workers.

Earlier this year, the Pensions Ombudsman, Paul Kenny, described the levy, which reaped €743m at its height in 2014, as “legal but not necessarily fair”.