The government’s new pensions’ roadmap comes under scrutiny in most of the Sunday newspapers and it appears its chosen vehicle may be as reliable as a dodgy brakes.   A consensus is emerging that the proposed changes will keep accountants very busy over the next few years as people scramble to make sense of the changes.

The Sunday Times reports that if executives are prepared to forego future pay rises they would still be entitled to tax relief at the current rate of 41%, rather than the proposed new rate of 33% from 2014.

Gerry Hassett, chief executive of Irish Life’s retail division, told the newspaper: “The national pensions framework is designed to tackle inequality but there is a clear anomaly in its proposals. It’s difficult to see how it can be resolved. If the government wants a single rate on tax relief on pensions, it should have a single rate on income.”

The government, however, may have a get out of jail card when it comes to this particular issue as the Revenue could get involved. Aidan McLoughlin, a pensions’ adviser, told the newspaper: “It’s illegal under the tax code to sacrifice salary in order to save tax. There’s nothing to prevent you sacrificing future salary increases and bonuses though by asking your company to pay them into your pension.

“We’re clearly going to see a lot of restructuring of company pension schemes before 2014.”

Also in The Sunday Times, Jill Kerby lauds the nobility of the government’s aspirations but suggests the timing couldn’t have been worse.

“During the boom, many people on low to middle incomes said they had other more pressing financial needs than a pension. Now, when incomes are being cut, taxes are going up and mortgage payments have become unaffordable, requiring them to contribute 4% of their incomes, their employers to pitch in with 2% and the taxpayer another 2% seems like one commitment too much.”

Meanwhile, experts are telling The Sunday Tribune that the scheme could backfire altogether as new entrants to the workforce delay joining because of the proposed tax changes.

“It’s going to be harder to persuade people to pay more if they won’t get the tax relief … some people won’t bother making contributions at all because the benefit won’t be there anymore,” according to Jerry Moriarty, director at the Irish Association of Pension Funds, whose members oversee more than €60bn.

Moriarty says the reduction in relief may undermine existing defined benefit schemes which need as many contributions as possible to remain solvent and fulfil their obligations.


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