NEW PENSION LEVY?
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 Irish Association of Pension Funds (IAPF) consulted legal advisers last week to see whether the levy, proposed at 0.5% a year for four years on the €90 billion invested in pension funds, was constitutional,” the newspaper says.
Jerry Moriarty, IAPF director of policy, confirmed legal advice had been sought on the basis the levy could be an interference with property rights. There is also a question of discrimination given that only private sector pensions would be affected.
“There’s huge anger among members of the schemes we represent, who’ve already seen benefits reduced and their contributions increased to try to restore the schemes to solvency,” Moriarty said, adding that the levy would consume the contributions of all members of some schemes for the next four years.
Around 65,000 people with private pensions will pay an average of €500 a year, the IAPF calculates. Another 700,000 workers and unemployed workers with private sector pensions but who have yet to retire are liable for a similar amount.
The IAPF is also proposing that individuals be allowed to drawdown a portion of their pension prior to retirement with any amount accessed subject to tax at 30%.
The Irish Congress of Trade Unions (ICTU) is also opposed to the Government raid, acknowledging the levy on private funds could cause more problems for the many schemes already in trouble.
However, this public stance hasn’t stopped The Sunday Independent going in all guns blazing against the leadership of the public sector unions over this controversial issue.
The newspaper quotes a senior government source as saying “the dark hand of social partnership” was behind the Government’s decision to confine the levy to private sector pensions.
“The unions have been successful in arguing that public sector workers have taken a big enough hit, and the Government is freaked about the threat of strikes or escalating unrest. This was seen as the pay-off,” another senior government source told the newspaper.
The Government is justifying the new levy as a fair way to raise money for its Jobs Initiative, which is expected on Tuesday.
“The Jobs Initiative is targeted to assist those most in need in our country – the unemployed,” a Department of Finance statement said. “The levy on pension funds will allow recipients of past tax relief to make a contribution to assist those who are looking for jobs.”
Update; the Pension Levy has now been set at 0.6% of Fund Value. If you have concerns as to how the pension Levy will impact on your financial planning contact Anthony Casey to discuss your position.