Government could continue with pension levy

A pensions expert has claimed the Government could continue with the pension levy because it has faced little popular opposition, in spite of costing pension savers an average of €2,500 each per year.

Samantha McConnell, chief investment officer at IFG Corporate Pensions, said that, in last year’s budget, the Government reneged on its promise that the levy was temporary, and not only increased it for 2014 but introduced a new levy for 2015.

She also expressed fears that it would be maintained at 0.75% and not reduced to 0.15% in 2015, as promised in the last budget.

“My view is that it is €675m they are going to get in from the levy this year,” she said. “That is a lot money to try to replace where you are trying to reduce income tax. It is an easy one for the Government to continue with.”

Ms McConnell said the levy was introduced by the Minister for Finance “to look after unemployment and tourism”.

“They were the intended beneficiaries of the levy,” she said. “If you look at the recent Bord Fáilte survey, three-quarters of tourism businesses are upbeat about their 2014 performance. We know the jobless rate is falling. The levy has done what it was designed to do and it should be revoked.”

The pensions expert said the average individual is paying €2,500 every year in the pension levy.

“If you think about the uproar there is about the water charges, what is astounding to me is that this has gone through and we are not having marches,” she said. “You have had €2.2bn taken out of pension schemes over the last four years and there has not been one march to protest against it.

“Ultimately it’s a stealth tax, it’s not in your face, it’s not coming out of your savings account. It’s effectively a tax on savings. If it was coming out of your bank account, I think there would be a lot more uproar about it. The pension levy has brought in more money than the property tax and water charges combined. That is wrong.”

Ms McConnell said while people were angry about the levy, “we have been angry about it for four years and nothing has happened”.

“I think people accepted it at a point in time because it was there at the worst of the crisis to fill a hole and it did that,” she said. “But people feel enough is enough, that a commitment was given that it was a temporary levy. We know we have a history in Ireland of putting in levies that are temporary and they last on average 20 years.”

She said the later in their careers people are, the more exercised they are about the levy. “I think the issue is that it does hit, in particular, people who are close to retirement and those in receipt of a pension that is paid of a scheme as opposed to an annuity — it is a direct reduction in their income. Its not fair,” she said.

The Government is under pressure to do something about the OECD requirement to bring in some sort of mandatory pension,” said Ms McConnell.

“It is very difficult to force people to save because at the same time they are taking something back out of the pot,” she said.