No further tax on pensions

Regarding the letter ‘Unfair pensions’ (Dec 13), the Minister for Social Protection has not announced and has no plans to announce “a further tax from 10% to 20% on all private pensions above €12,000 per annum”. This is absolutely incorrect.

For many years certain pension schemes known as Defined Benefit schemes have been in significant difficulty. These difficulties mean that in some affected schemes, workers have lost very significant amounts of the pensions to which they were supposed to be entitled upon retirement.

The minister recently announced new provisions for Defined Benefit pension schemes which will be contained in the Social Welfare and Pensions Bill (No.2) 2013. These changes are aimed at ensuring a fairer deal for workers yet to get their pensions and sufficient protection for retired persons already in receipt of their pensions.

The changes do not affect Defined Contribution schemes. Neither have the changes anything to do with the State “Old-Age Pension”, which is totally unaffected.

The changes relate only to Defined Benefit schemes which run into funding problems. At present, when an underfunded Defined Benefit scheme is winding up, pensioners are 100% prioritised, often at the expense of current and former employees who may receive little of their promised benefit.

In future when an underfunded pension scheme is winding up and the employer is solvent, the existing 100% priority being given to pension benefits is being changed to limit the priority given to higher pensions.

Similar provisions are also being made for schemes that are restructuring. In such a situation, pensioners in receipt of pensions under €12,000 will receive 100% priority to ensure that they are not affected by this. Pensions between €12,000 and €60,000 may be reduced by up to 10% of the total pension amount. Those of pensions of over €60,000 may be subject to a maximum reduction of 20% of the total pension.

This will ensure that current employees and former employees (who are not yet retired), and who have also contributed to the pension scheme, receive an improved share of the benefits. These new provisions will allow for a fairer and more equitable distribution of scheme assets and an improved level of protection for current and deferred members of schemes.

Further details are available at www.welfare.ie.

Niamh Fitzgerald

Press Officer

Department of Social Protection

Dublin 1