Judges and politicians to keep bumper pension pots
Judges and politicians will be able to keep bumper pensions – despite moves to restrict what ordinary workers can retire on.
Senior public servants are being allowed to build up a much larger pension under complicated changes in the Budget that have gone unnoticed.
The changes mean senior civil and public servants, like judges and county managers, who retire in the next five years will able to retire on pensions of up to €115,000 a year.
Ordinary workers will have a limit of half of this imposed on the size of pensions they can get to qualify under new tax rules. They will have to pay a 'super tax' of 70pc for pensions over €60,000.
The measures were set out in the FinanceBill on Thursday – legislation that gives effect to changes in the Budget. Pensions experts accused Minister for Finance Michael Noonan of skewing the rules to ensure high-earning public servants will be able to keep big pensions entitlements they have amassed up to now.
Most private sector workers will have a cap imposed on them, meaning they will not be able to get a pension that exceeds €60,000 if they are to avoid paying a "super tax" of around 70pc.
President of the Irish Brokers Association John Bissett told Mr Noonan at a conference that the changes amounted to discrimination and inequality.
He said public sector workers were already paid 50pc more than those in the private sector.
"The pension cap does not address this issue as it will take another 40 years to apply in full.
"Senior civil servants who retire in the next five years can receive a pension of up to €115,000 per annum, whereas private-sector workers in defined contribution schemes are immediately capped at €60,000," he said at the Irish Brokers Association annual lunch.
The new pensions cap rules come in from January. But those who have already built up big public service pensions will get to keep the funds in place.
Aidan McLoughlin, of the Independent Trustee Company, said: "Those in the public sector and others in the private sector's defined-benefit pension schemes won't be hit by this restriction and won't see this limit fully applied until January 2054."
The private sector was unlikely to gain as most of their defined-benefit schemes are in deficit.
"The department appears to have decided that the measure should only apply to benefits accrued from this point forward for those in defined-benefit pension schemes, which would include public sector schemes."
He said this was why moves to limit tax relief on pensions investing is set to deliver less than the Government had been expecting.
The new limit on the amount of tax relief people can get for putting money into pensions was expected to deliver savings of €250m to the Exchequer. This is €130m less in revenue than the Government originally expected.
Mr Noonan had appeared last week to blame the pensions industry for supplying him with incorrect figures, which had led to the Exchequer shortfall.
But industry experts accused him of failing to implement the changes the way the industry recommended, in a bid to protect the pensions of politicians and high-paid civil servants.
A spokesman for the Department of Finance rejected this and said the Government's legal advice was that it could not interfere with the existing pensions entitlements of people.
He added: "The fact remains however, that even without these features the yield projected by the pensions industry was not realistic."