Lawyers and actuaries are busy advising clients how to mitigate or even avoid the 0.6% pension levy according to Jill Kerby in The Sunday Times, who is telling people with private pensions to ask their trustees, administrators or advisers about the effect of the levy on their projected incomes in retirement.
In addition to the recent imposition of the Pension Levy, the Finance Bill 2011 reduced the maximum pension fund size. The maximum allowable pension fund on retirement for tax purposes (known as the Standard Fund Threshold (SFT)), has been reduced from €5.4 million to €2.3 million.
It may have been well flagged by www.taxation.ie over the past weeks, but this weekend the front pages of the newspapers eventually caught up. The broadsheets are awash with the backlash generated by the Government’s unprecedented raid on private pensions to fund its Jobs Initiative announced on Tuesday.
And he hasn’t gone away, you know. Former Sindo business editor turned TD Shane Ross pens a caustic piece for his former employer expanding on his very public denunciations of pension fund managers in the dail chamber during the week.
The Sindo is nothing if not a broad church – it is one of the hallmarks of its enduring success. One of those to whom Ross is probably referring – the chief executive of Standard Life Ireland Nigel Dunne – writes elsewhere in the same newspaper of a need to rebalance the 0.6% grab to include public sector workers.
Whatever about the moral and constitutional repugnance of the proposals and the non-performance of fund managers who extract large fees, others have been busy getting to getting to grips with the bottom line. The Sunday Business Post reports private pension funds could drop in value by 21% if the new levy becomes a permanent fixture. And let’s face it, what Government is likely to voluntarily release its grip on any revenue stream, particularly given the situation in which this country finds itself for the foreseeable future?
On the broader issue, pensions experts are questioning if the €470m a year the Government will raise by the measure will damage the economy more than help it in its quest to create an unspecified number of jobs.
Over in The Sunday Times, veteran pensions watcher Jill Kerby has already moved on to the possible implications for other savings and describes Government “black propaganda” on the issue as Orwellian.
The obvious answer is “not much” but The Sunday Times does advise some possible ways of mitigating the damage of the levy.
“If you can afford to top up your pension you must do so before the end of 2011 because the government is likely to curb tax relief on contributions, on top of the new levy,” writes personal finance editor, Niall Brady.
On Tuesday 10th May 2011, the Minister for Finance announced the introduction of a new tax. It is called a Pension Levy and will be applied on Private Pension Scheme assets. It was included in the government’s announcement on a Jobs Initiative.
The pensions industry may mount a legal challenge to Government proposals to take €450m a year from private pensions to fund its Jobs Initiative, The Sunday Times reports.
The Government will set tax relief on pension contributions at 33% in a reversal of the previous administration’s decision to cut them progressively from 41% to 20%, The Sunday Times reports.
A 0.5% levy on private pension funds rather than any increases in income taxes will be the main funding tool for the Government’s €500m jobs initiative to be published next month, according to The Sunday Times.