Closing tax loopholes in pension undustry

The Pensions Board recently announced new funding standards for occupational pensions. Two high profile companies are considering closure of their defined benefit pensions for new employees as a result.

This threat is more to do with the Government’s plans to reduce the tax benefits enjoyed by the industry. Both AIB, as a major pensions provider, and INM, as a major advertiser for the industry, stand to lose a lot if the Government introduces their long overdue reduction in pensions subsidies.

Will the unions ensure that these new employees will be adequately compensated for their loss of benefits, thus avoiding a repeat of the inequity caused in the workplace by the yellow pack policy pursued by banks some years ago?

The underfunding of pension schemes was caused by loopholes in the 1990 Pensions Act. Employers were allowed to take contribution holidays and alter their workers age profile by selective redundancy. Even the funding period was extended during the boom years. They are now closing defined benefit schemes to new employees and leaving others with little or no pension.

In a recent press article Jill Kerby described these as “Ponzi schemes”, Ponzi schemes which are being promoted by the Pensions Board who encourage people to donate 15% of their earnings to these schemes.

Is it time for the Government to withdraw all tax subsidies from underfunded pensions schemes?

Michael Terry

College Grove

Castleknock

Dublin 15