Thursday 29 September 2016

Noonan scraps controversial pension levy

Colm Kelpie and Charlie Weston

Published 14/10/2015 | 02:30

Minister for Finance Michael Noonan
Minister for Finance Michael Noonan

Finance Minister Michael Noonan has held to his promise to scrap the controversial pension levy.

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Hundreds of thousands of people who were members of private sector pension schemes across the country were being hit with the levy, which was supposed to be a temporary measure due to finish in 2014.

Finance Minister Michael Noonan said the controversial measure had been rolled out to offset the reduced rate of VAT as well as other job creation measures.

But he said its job was now done, and that the VAT cut to 9pc for the hospitality sector was more than made up by the increase in activity and employment.

"So I can confirm that the remaining pension fund levy of 0.15pc introduced for 2014 and 2015 will end this year and not apply in 2016," he said.

The levy has reduced the size of pension funds of those who are yet to retire and has lowered the payments to those who are already retired.

The levy was originally applied at a rate of 0.6pc every year on the value of pension assets. But the minister decided to increase the levy to 0.75pc of the assets of pension funds for 2014 and then to impose it at 0.15pc up to 2015.

In Budget 2015, Mr Noonan was accused of going back on his word by opting to retain the levy for another year. But he promised at that stage that it would be phased out.

John Tuohy, chief executive of pension and investment advisors Acuvest, said the long awaited removal of the levy is welcome.

"From talking to companies and their employees this tax on private pensions has put many off investing in their retirement savings or increasing their contributions," he said.

"As people live longer adequate pension provision should be a key consideration and saving for retirement should be encouraged by the Government, not discouraged. The removal of the levy goes some way towards that."

Lobby group the Irish Small and Medium Enterprises Association (Isme) said the levy was a penal tax on private sector workers.

PIBA, the country's largest group of financial brokers, said confirmation of the ending of the pensions levy was "a relief since it was a grossly inequitable tax on the pensions' savings of private sector workers primarily."

New research published last month shows that almost 900,000 people will have to rely on the State pension when they retire because they have no private retirement fund in place.

There has been no rise in the numbers with a pension since the financial crash, a new report by Friends First says.

The failure of more people to start a pension comes despite the survey showing two out of five households are seeing an improvement in their finances.

Irish Independent

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