Levy advice from Pensions Board ignored by Cabinet
State body warned some schemes would be forced into winding up
Published 10/08/2011 | 05:00
THE Government turned down its own official advice when it introduced the controversial levy on private pensions funds, it has emerged.
The Pensions Board, the state body charged with advising the Government on pensions policy, warned the levy would force some schemes that are already in deficit to wind up.
Similar concerns were expressed to Cabinet by officials in the Department of Finance and in the Department of Social Protection.
A confidential briefing, secured by Fianna Fail, shows that Pensions Board chief executive Brendan Kennedy told the minister with responsibility for pensions, Joan Burton, that the levy would impact on the ability of schemes to pay benefits to members.
A briefing note prepared by the Pensions Board and marked "highly confidential", states: "Approximately 75pc of defined benefit pension schemes are currently in deficit.
"Paying a 0.5pc levy will add to the schemes' deficit position. A reduction in the assets of the scheme is likely to impact on the ability of a scheme to pay benefits to its members . . . it is possible that the introduction of a levy will force some schemes in deficit to wind up."
Chairwoman of the Pensions Board Jane Williams wrote separately to Ms Burton on April 20 this year warning of the impact the levy would have on scheme solvency and equity among pension contributors.
And the correspondence from the Pensions Board clearly sets out the view of the board that Approved Retirement Funds (ARFs), traditionally used by wealthy individuals, should be included in any levy.
This advice was ultimately ignored by the Government.
The letter states: "If it is decided to include the assets of occupational schemes corresponding to the obligations to retired members, consistent treatment of ARFs should be considered. It's important that any changes are consistent between different forms of pensions and do not create any anomalies."
Fianna Fail finance spokesman Michael McGrath said it was clear from the documents that the Government was aware of the concerns the Pensions Board had about the impact of a levy on private pension funds and that the levy could result in schemes being wound up.
"These concerns were completely ignored by the Government," the TD said.
Mr McGrath accused Finance Minister Michael Noonan of failing to reveal the official advice he received when he answered questions on the issue in the Dail.
A spokesman for the minister denied this. "There was no formal consultation by the minister or the Department of Finance with the Pensions Board in advance of the Government's decision to introduce the pension levy to fund the Jobs Initiative," the spokesman said.
Last May, the Government announced it would impose a 0.6pc levy on pension funds for four years to generate €470m a year to fund up to 100,000 jobs.