THE PENSION LEVY – THE HARSH REALITY
Whatever about the moral and constitutional repugnance of the proposals and the non-performance of fund managers who extract large fees, others have been busy getting to getting to grips with the bottom line. The Sunday Business Post reports private pension funds could drop in value by 21% if the new levy becomes a permanent fixture. And let’s face it, what Government is likely to voluntarily release its grip on any revenue stream, particularly given the situation in which this country finds itself for the foreseeable future?
The newspaper reports on research conducted by pensions advisers IFG into the impact of the 0.6% deduction that shows compounded it could rob a fund of at least a fifth or its expected assets on drawdown.
“Every 0.1% into a fund adds 3.5% over a lifetime of 40 years,” according to Fionnan O’Sullivan, director of IFG corporate pensions. “It works the same in reverse, so 0.6% taken out is actually reducing the fund by about 21% in retirement.”
In concrete terms, this means someone who was expecting to live on €50,000 a year, can now expect to live on €40,000.