THERE was a tidal wave of outrage after the Government confirmed that it is part-funding the jobs initiative with a four-year levy on private pension savings that is backdated to January 1 this year.
The 0.6% levy has been established to raise €470 million a year. Over the four years that it is supposed to operate, it should raise €1.88 billion from the funds of private sector employees and pensioners. Public sector employees and non-residents will not be subject to the tax and neither will any funds that are already in wind-up before today.
Chief executive of the Irish Brokers Association, Ciarán Phelan described the levy as a “stealth tax imposed on the savings of ordinary people by politicians and civil servants who’ve ensured that their own pension benefits remain gold and diamond plated”.
“We believe that this initiative could be a precursor to a levy on bank and credit union deposits if Ireland’s solvency position becomes even more challenged. There appears to be a policy within the Department of Finance to design new taxes that only hit people outside of the public sector, with ministers and policy decision-makers specifically exempt from this new tax.”
Irish Insurance Federation chief executive, Mike Kemp said the levy penalised “middle-income earners”.
“The raiding of private pension savings goes against the advances that have been made in recent years to encourage people to save for their retirement… it is in the longer-term interest of the state itself, as well as of individual citizens, to encourage private occupational pension provision.”
Irish savers have about €75bn in private pension plans and €93bn in deposit accounts. The Government said targeting the pension pot was “reasonable” and “less damaging economically than raising other taxes”.
It also said only private pension funds will foot the bill as public sector workers and pensioners have already taken a cut in incomes.
Managing director of Money Advisor, Bob Quinn, also described the levy as “a new and dangerous departure in Irish government policy”.
“It’s one thing to increase Deposit Interest Retention Tax (DIRT) on deposit accounts or the exit tax on investments as this only applies to the gains made on these accounts. What the Government intends doing today is appropriating capital from pension funds. We’re told it’s just 2.4% (0.6% per annum), but where does it end?
“Are we going to stand idly by while this government introduces a funding element which erodes your pension fund? Will this lead to appropriating capital from deposit accounts or a levy on your mortgage principal? Today marks that point of no return.”
The president of Irish Creamery Milk Suppliers, Jackie Cahill, described it as “the latest evidence of an astonishing reluctance on the part of the Government to deal with the public and private sectors on anything like an equal footing”.
“The levy is nothing less than an unjust attack on private property and is, in addition, probably unconstitutional,” he said.
According to Irish Association of Pension Funds chief executive, Jerry Moriarty, the levy will “effectively divide pensioners into the lucky and the not so lucky. Those pension incomes that have been structured under a purchase annuity are not going to be affected, leaving the pensioners whose retirement fund remains within the original pension scheme facing huge cuts”, he said.
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