Insurance firms fail to halt 1pc levy on pension schemes
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LOBBYING by insurance companies has failed to persuade the Government to scrap plans to put a levy on pension schemes and life insurance products.
The only concession in the Finance Bill was a two-month extension of the deadline to August 1 for the imposition of the new 1pc levy on all life insurance premiums.
As a result, the insurance industry is now gearing up for a fresh lobbying effort in a bid to get the deadline extended further when the Bill is at amendment stage.
The new levy will apply to PRSAs (personal retirement savings accounts) and AVCs (additional voluntary contributions) and defined contribution schemes which are all issued by life assurance companies.
PRSAs were launched as low-cost flexible pensions. Under law, the maximum charge for a standard PRSA cannot exceed 5pc of contributions or 1pc, per annum, of the PRSA assets.
However, it is not expected that the levy will apply to "fat cat" bosses who have self-administered pension schemes that are not arranged by a life company.
Life assurance manager with the Irish Insurance Federation (IIF) Jennifer Hoban said it appeared that the new levy would not be imposed on self-administered pensions which are not sold by life assurance companies, and that larger occupational pension schemes would also escape.
The changes announced in the Finance Bill were discussed at a meeting between the IIF and leading insurers yesterday.
"The feeling was that bringing it in on August 1 doesn't materially alter things, in that August 1 is still unworkably soon," said Ms Hoban, adding that Finance Minister Brian Lenihan "did not address in any way the concerns we have about the levy on pensions".
The IIF has already written to the Department of Finance and told them the June 1 deadline is impossible to meet.
Ms Hoban said insurers would now seek amendments to the Finance Bill before it becomes law at the end of May. "We will be making strong representations to the Department of Finance," she added.
Some one million people have no private pension, while in a recent survey, 70pc of brokers said consumers were reducing pension contributions.
Taxpayers are also facing higher premiums on everything from car and home insurance to mortgage protection and serious illness cover after Finance Minister Brian Lenihan brought in a 1pc levy on those products.
The Finance Department said last month that managed group pension schemes would be exempt from the levy. But the majority, if not all PRSAs, are operated on an individual basis.
- Charlie Weston and Laura Noonan
