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THE PENSION LEVY – WHAT CAN YOU DO?

The obvious answer is “not much” but The Sunday Times does advise some possible ways of mitigating the damage of the levy.

“If you can afford to top up your pension you must do so before the end of 2011 because the government is likely to curb tax relief on contributions, on top of the new levy,” writes personal finance editor, Niall Brady.

After last week’s announcement of the levy, the pensions industry is now sceptical of Government promises to the EU and IMF that a 33% flat rate tax relief will be introduced.

“You’d be a fool to believe that after imposing the levy, tax relief at the top rate is now safe,” said actuary Tony Gilhawley. “It’s hard to know what’s going on.”

Some people are considering transferring their pensions overseas, with Malta, Cyprus and Portugal the favoured destinations. This is entirely legal under EU law.

Aidan McLoughlin of Independent Trustee Company, a specialist in self-administered pensions,  says although there might be a legal requirement for a fund to collect the 0.6% levy, how could it do so in practice if the funds were beyond its reach?

“The levy is imposed on trustees and administrators – not members of pension funds. There might be a legal requirement on the fund to pay the levy, but how could it be enforced if the fund was in Malta or somewhere else,” he said.

The sting for most people is they would need a fund of at least €500,000 before it would be worthwhile moving it offshore.

“It’s expensive to transfer your pension to another jurisdiction,” said John Bradley of KPMG. “There would have to be more at stake than a levy of 0.6% over four years to make it worthwhile.”

However, Brady’s colleague Jill Kerby says one well-known adviser is charging a flat fee of €450-500 on minimum sums of €200,000 to allow clients open euro deposits with Deutsche Bank, paying 0.5% on demand or 1.9% for a year, and to purchase German government bonds.

Business must be brisk because Kerby says the adviser asked not to be named “because he fears being swamped”.

Presumably he could take on more people to handle the additional business but it’s probably not the kind of Jobs Initiative the Government had in mind!

Meanwhile, The Sunday Business Post reports finance minister Michael Noonan appears to be in no rush to meet representatives from the pensions business. Apparently, a meeting was due to take place but it has now been postponed until after the publication of the Finance Bill on Thursday.

“The minister is scheduled to meet the Irish Association of Pension Funds in the coming weeks. There was no definitive date set for the meeting,” a Department of Finance spokesman told the newspaper.

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