THE Government must get its priorities right and deliver on an important tax law change that is penalising some pension payers.
Director of client advice firm, advisors.ie, Karl Deeter, said that ‘personal retirement savings accounts’ or PRSAs were created in an attempt to get more people to save for their retirement. He said they were billed as a universal solution with fixed fees and low costs, along with flexibility.
“However a taxation issue that arose when the Universal Social Charge was introduced, puts people with PRSAs at a disadvantage to those in occupational schemes.
He said that at present, employer contributions to an occupational pension scheme do not incur the universal social charge while employer contributions to a PRSA are viewed as Benefit in Kind (BIK) and because of that they incur the Universal Social Charge.
“This puts them at an unfair footing when you compare two pensions in which an employer is willing to contribute.
“The problem was identified in the Fine Gael Manifesto but as yet there have not delivered on what should be a simple change in legislation,” said Mr Deeter.
“What they are willing to do upon taking power is to dip into pension schemes for funding as part of their jobs programme.
“This move will take 0.6% of the value from pension funds that may already be insolvent, and it levies yet further pain on PRSA holders whose employers contribute to their funding,” he added.
Mr Deeter was also highly critical of the levy in general saying that “taking money from an insolvent scheme is like confiscating money from a homeless person”.
“What is the point of a levy on a fund that is already broke and that will not be able to pay its members in the future?
“About 75% of the defined benefit schemes in Ireland are already insolvent,” he said.
© Irish Examiner Ltd. All rights reserved