THE PENSION LEVY – A COHERENT STRATEGY?
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.
Specifically, they list
- Insolvent pension schemes
- Asset flight offshore
- Redundancies
- Pay cuts
- Loss of foreign direct investment
as the main adverse effects of an ill-conceived strategy.
As markets correspondent John Ihle points out in The Sunday Business Post: “Every private pension will take the same hit but defined benefit schemes – which promise members a guaranteed payout upon retirement – are most vulnerable.
“Already 75% of defined benefit pensions are underfunded, meaning they do not have enough money to meet their expected liabilities. In other words, they cannot pay what they promised.
“The situation is critical. Without extra contributions from members or the employers that sponsor them, many such schemes will be forced to either reduce benefits or wind up, which could potentially leave late-arriving members with little or nothing.”