IBEC claims budget disincentivises the provision of pensions

EMPLOYERS will no longer receive any relief on contributions made by employees into their pensions — at an annual cost of €90 million to employers.

Brendan McGinty, director of industrial relations and human resource services at IBEC, said the move disincentivised the provision of a pension.

According to Mr McGinty, abolishing employer PRSI relief on employee pensions will increase labour costs and is a further cost on employment.

“Historically, this meant that employers were able to get relief on contributions made by employees into their pension schemes. The last government cut that by 50%, and the balance is now being removed,” he said.

“The difficulty here is that as a result of all the various tax changes in respect of pensions including this measure, all add to unattractiveness of pension provision.”

IBEC said the scale of the budgets positive measures was small when compared to the very negative effect of the €90m increase in employer PRSI charges and the major reduction in the redundancy rebate, announced Monday.

Meanwhile, the country’s main business organisations gave a mixed reaction to the budget — praising business support measures while criticising the Government’s failure to make more cuts in expenditure while raising taxes.

Chambers Ireland signalled renewed attacks on the Croke Park Agreement saying it wants to see quantifiable savings from the agreement in 2012, after what it called the Government’s failure to make hard decisions.

Chambers Ireland chief executive, Ian Talbot said, “The 2% increase in VAT is very disappointing. However, this won’t apply until Jan 2012 and gives a window for consumers to spend over the next four weeks.

“We welcome the rise in the exemption limit for the Universal Social Charge from €4k to €10k as a positive move which will incentivise work but we would like to have seen further initiatives to make this a jobs budget.”

IBEC said the Government relied too heavily on increasing tax in Budget 2012.

IBEC director general Danny McCoy said: “€1.6 billion will be raised in tax, with only €1.45 billion saved in current expenditure reductions, and this will undermine future economic growth. Budget 2012 will be one of the most inflationary budget in decades, adding approximately 1.5% to the inflation rate next year and will undermine Ireland’s efforts to regain competitiveness lost during the boom years.”

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