Changes to tax relief will stop people from saving
Saturday November 28 2009
MIDDLE-income people will be hardest hit if the Government alters the tax relief for pension investment, the Society of Actuaries said yesterday.
The society said the consultation process on the Pensions Green Paper gave rise to 384 submissions and to change the current system in advance of the discussion on any new pension system would be premature and potentially damaging.
Removing the marginal rate relief will affect middle-income employees most and will act as a disincentive to making financial provision for retirement.
"This is contrary to the Government's long-standing policy to encourage private sector pension provision and increase the overall level of pension coverage. It is also contrary to previous initiatives to stimulate private pension provision, such as the introduction of Personal Retirement Savings Accounts (PRSAs)," Brian Mulcair of the society said.
Analysis
Meanwhile, the broker body PIBA has challenged the ESRI (Economic and Social Research Institute) on the effects of changes to pension tax reliefs saying that it was based on "theory rather than an understanding of consumer behaviour."
PIBA's Diarmuid Kelly said that the ESRI's analysis failed to take account of the fact that consumers were already cutting back on contributions.
"Our members are reporting major cutbacks already by people in terms of contributing to their pensions. If this change is implemented, it will have a devastating effect on pension provision in Ireland."
- Charlie Weston Personal Finance Editor
Irish Independent
