Call for pension proposal U-turn

Michael Noonan has been urged to do a U-turn on his pension proposals in next month’s Finance Bill; with proposed pension levy changes being slammed as unjustified and a potential deterrent to people saving for retirement.

Contributions made to pension schemes will continue to attract income tax relief at the marginal rate of tax.

However, the 0.6% levy introduced to fund job creation two years ago — set to be dropped at the end of 2014 — will effectively be increased to 0.75% next year, via the introduction of a new levy of 0.15% covering pension funds in both 2014 and 2015. In the latter year, it will drop to 0.15%. Whether it remains at that level is open to question.

“The minister went out of his way last December to say that the ‘pension levy announced as part of the Jobs Initiative will not be renewed after 2014’, and highlighted the need for certainty in the pensions sector. Ten months later he reverses that commitment, so it’s difficult to believe him now that the 0.15% levy scheduled for 2015 will only be that and will not be increased substantially in next year’s speech,” said Jerry Moriarty, CEO, Irish Association of Pension Funds. He added there is “no justification” for increasing the levy, to €650m next year.

“For a Government that says it wants people to save for their retirement this sends out the exact opposite message and will lead to further cuts in pensions. It must also be remembered that this tax only applies to private sector pensions. The minister’s own pension benefits are specifically excluded from this tax.”

The Professional Insurance Brokers’ Association has called on Mr Noonan to reconsider his proposals.

According to PIBA chief, Diarmuid Kelly: “Those in defined contribution and personal pensions/PRSAs will now be forced to contribute to a bailout scheme for guaranteed pension benefits of defined benefit schemes where double insolvency applies. This is despite the fact that they will never enjoy the same defined benefit guarantees.”

Mercer’s Niall O’Callaghan said the decision to introduce a lower cap of €2m on the annual pension that can be provided from approved pension arrangements will have implications for many.