TAXING PENSIONS

The €2.7 billion paid by the government to retired public sector workers will have to be taxed further and the Croke Park agreement will become null and void as the price Ireland must pay to stay out of the European bailout fund, a leading credit ratings analyst has told The Sunday Tribune.

Chris Pryce, lead director at Fitch Ratings, warned the alternative to increased taxes on public sector pensions would be the loss of Ireland’s preferential 12.5% corporation tax as part of a European bailout.

Sweeping changes to pension schemes have caused an uncertain outlook for many people, The Sunday Times reports in an extensive tour around the minefield of changes.

Niall Brady, the newspaper’s Personal Finance writer, notes that high earners can expect to contribute more to their pensions in future because of less tax relief and a new tax on retirement lump sums of more than €200,000. Also, workers can expect to pay more for less as pension schemes struggle with big deficits.

The earnings limit on which pension contributions are based was reduced to €150,000 in 2009, which limits people aged over 55 to a maximum contribution of €52,000 a year or €60,000 for those over 60.

This may seem reasonable but it would work out at only €16,250 a year for those who decided (or could only afford) to begin their pensions during this time because they needed every bean they earned to keep and grow their small business.

The newspaper advises you can circumvent the restriction if you own your own company because it can make contributions on your behalf.