Pensions tax relief cut ‘unfair, senseless’

THE decision by the Government to slash pension tax relief as part of the four-year recovery plan has been condemned as unfair and senseless by the Irish Brokers Association.

“The proposal to cut pension tax relief will hit the self-employed hardest,” said the organisation’s CEO, Ciarán Phelan, last night.

“If fairness and logic were part of the thinking the pain would have been spread evenly by including benefit in kind on employers’ contributions, thus sharing the impact amongst all workers, including our public representatives.

“Current policy appears to focus on reducing the subsidy to the self-employed whilst leaving the pension benefits of ministers untouched. In a fair society this makes no sense whatsoever.”

Those providing for their retirement will now find it costs them an extra €32 for every €100 they put into a pension. This is because of the loss of tax relief from PRSI and health levy payments when money is put into a pension, and from the gradual reduction in the tax relief rate for pensions investment for higher taxpayers from 41% to 20%.

Head of Irish Life’s retail business Gerry Hassett echoed Mr Phelan’s sentiments, saying that middle-income earners, rather than the truly wealthy, would suffer most.

“The minister said pensions is all about fat cats and tax planning. In fact, the people who are not affected by this are the fat cats,” said Mr Hassett. “I am a PAYE worker so I have no option but to accept this relief cut but, if I was a business owner, instead of paying for my pension out of my own contribution, I could get my company to do it as there is no cap on company earnings.”

Speaking on Today with Pat Kenny on RTÉ Radio, Mr Hassett described retirement planning as “a noble cause” and said that 95% of people in Ireland who pay into a pension plan are earning €70,000 or less.

“They are the plain people of middle Ireland. Typically they put in €250 a month. That’s somebody on a middle income who is trying to put a little bit away today to make tomorrow a bit better.

“The state has a vested interest in encouraging people to do that. It is important, when making fiscal adjustments, that we maintain that incentive.”

By bringing the rate of tax relief down to 20%, the Government was storing trouble up for the future, said Mr Hassett. “We are solving one problem and creating an even bigger one. There are six people working today for everyone in retirement. Soon there will only be only four working for every person in retirement.”

Paul Sweeney, economic adviser to the Irish Congress of Trade Unions, described the cut in tax relief as a major disincentive for people to take out pensions. He added that it was an illusion that the state’s finances could be restored in four years.

Age Action noted that the four-year plan gave no commitment to protecting the contributory or non-contributory State pension, but said it did include measures which would “hurt the poorest and most vulnerable of older people”.