Pensions industry first to suggest levy, says minister

THE Government has admitted some high earners will escape paying the new pension levy as their money is invested in special retirement schemes and not funds targeted under the charge.

Finance Minister Michael Noonan also revealed that the pensions industry itself had suggested introducing the controversial revenue-raising charge when he had been in opposition.

It emerged yesterday that people holding Approved Retirement Funds (ARFs) will not have to foot the 0.6% levy to help pay for the Jobs Initiatives.

Holders of ARFs are in the main wealthier, self-employed or the owners of company assets.

But Taoiseach Enda Kenny stressed that the special group of pension holders do pay tax and that charges were set on their schemes permanently, unlike the temporary levy.

The Department of Finance said ARFs were not covered by the levy as they were not pension funds.

The schemes were close in nature to actual pension funds but draw-downs on ARFs were taxed, the department said.

If not drawn down, there was a distribution of 5% of the scheme’s assets per annum, which was then charged at the owner’s standard tax rate, the department added.

This means for example that if there is €1 million in an ARF, a holder is charged income tax at the appropriate rate on €50,000 each year, whether the fund is drawn down or not.

The last Budget had also increased the amount of assets that get taxed from 3% to 5%, it was added.

SIPTU president Jack O’Connor expressed concern that wealthier people with ARFs would escape the levy.

Mr Noonan told the Dáil that up to 94% of pension funds were invested abroad and therefore the levy overall would have little or no effect on the economy.

But Mr Noonan again hit back at the pension industry’s criticism of his new charge. “I’d prefer if the industry debated it in a more rational way especially as they proposed it in the first place.”