THE TRUE COST OF THE PENSION LEVY
The new 0.6% pensions levy – which will net the government €1.65 billion – must be passed on to pensioners or it may threaten the solvency of existing underfunded defined benefit pension plans according to the pensions industry. In documents obtained through a Fianna Fail Freedom of Information Act request, senior civil servants warned cabinet ministers that any levy on the pension industry to fund a jobs initiative would hurt the sector while pension executives said it would ultimately hit pensioners benefits, says the Sunday Times.
The Association of Pension Lawyers in Ireland was one of many pension experts to condemn the tax. “The proposed levy places an additional, inequitable and disproportionate burden on the private sector. It also seems to use to breach the principles of non-retrospective penal legislation and ability to pay” said Catherine Austin, its chairman.
It was also revealed that social protection minister Joan Burton said the levy would lead to a fall in the payment of benefits to pensioners. It is unlikely that many, if any, schemes will be able to afford to pay the levy without passing the costs on to scheme members.”
Meanwhile public sector unions reacted angrily about proposed future reforms that would see the pensions age raised to 66, high earners forced to pay more into their schemes and members’ pensions based on actual pay rather than final salary. Unlike their private sector counterparts though the schemes for new recruits “will remain defined benefit, a concept that has long since disappeared for new recruits to the private sector” says a Sunday Times editorial.