The Government’s €6 billion Budget plans may founder on proposals to cut the state pension, with Fianna Fail backbenchers threatening revolt over the issue, The Sunday Times reports in its lead story.

This follows last week’s story in the same newspaper, which said education could be the stick that breaks the Coalition’s back. It appears if the young won’t get you; the elderly will.

In what is surely one of the quotes of the week, one senior FF TD said: “The Russians have surrounded us, even though we’ve been told for the last 10 years that we will always win. Despite all the propaganda, we’re finally realising the truth … The war is over, and we’ve lost.”

Aside from the craic someone will probably have this week creating a YouTube video complete with Brian Cowen in a bunker during the last days of his Reich barking orders at his hapless lieutenants; it would appear the foot soldiers of destiny are drawing the battle lines at pensions.

“It’s a red line issue for a lot of people, including myself,” said Darragh O’Brien, A Dublin North TD. “We accept that while all areas of expenditure need to be looked at, there is no justification for cutting the old age pension. I have no difficulty with anything else we have to do, but that I have a difficulty with. I know what the members are saying, and I know what I’m saying: it’s a no-no.”

Separately, the same newspaper reports pension advisers believe the Government should impose a €400m emergency levy on retirement funds in the Budget rather than slash tax relief on private pension contributions.

The Professional Insurance Brokers Association told the Department of Finance last week that temporary levy introduced for up to 10 years would do less damage than curbing top-rate tax relief but would still bring in as much revenue.

Diarmuid Kelly, the association’s chief executive, told the newspaper that “interfering with tax relief would cause long-term damage but an emergency levy would give government the revenue it needs without damaging pension funding”.

Meanwhile, four out of five employers believe their employees will struggle to maintain their contributions if tax relief is cut in the Budget, according to The Sunday Business Post.

A survey by IFG Corporate Pensions found that 84% of employers would not be able to maintain their present contributions.

“This is unsurprising, as affordability is becoming a key factor in every aspect of expenditure for the Irish worker,” said Fionán O’Sullivan, director of IFG Corporate Pensions. “The Government needs to understand the longer-term implications of its decisions when planning for the 2011 Budget … There is no logical rationale in adopting this slash-and-burn approach to private sector pensions.”

The gulf between private and public sector pensions also came in for a lashing in the survey, with 93.5% of respondents saying the latter should be reduced in line with private sector benefits.

Over in The Sunday Tribune, it would appear that despite the hand-wringing by the pensions industry, the tax relief reforms are all but a done deal.

The newspaper says Government is preparing to slash all tax relief on pension contributions to the standard rate of 20% in a move that will effectively cost savers €500m a year in new taxes. Most of these will be from the middle and upper-income brackets who currently can claim relief at 41%.

Apparently, the proposal made just two months ago in the National Pensions Framework to introduce a new 33% rate for everyone regardless of income has been scuppered because it would bring in a mere €115m in additional revenue.

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