Pension funds to avoid levy by moving offshore
UP TO a quarter of pension funds in the State may be moved offshore to avoid the controversial new pensions levy on private schemes, a survey conducted by pension advisers Towers Watson has found.
And eight out of 10 schemes may be scaled back or closed because of the higher cost imposed by the levy.
The findings of the survey are proof that the proposals for the levy were hasty and ill-conceived, according to Raymond McKenna of Towers Watson.
The levy of 0.6pc on private pension assets could reduce pension payments by between 8pc and 10pc for the period of the levy.
If the cost of funding the levy is absorbed by employers this could lead to a significant reduction in competitiveness and jobs caused by the burden of the €470m a year levy, Mr McKenna added.
He said the survey of Towers Watson's clients, which represent over 250,000 members of company pension schemes, showed that six out of 10 companies with defined benefit schemes confirmed that they would not be able to absorb the cost of the pensions levy.
Instead, they would be seeking to pass this charge on to pension scheme members through benefit reductions.
In these cases, all categories of members (active employees, deferred members and current pensioners) would see their benefits reduced.
And eight out of 10 respondents confirmed that the levy will mean that they are likely to scale back, or cease, defined benefit pension provision.
Mr McKenna said: "The levy is counter to government pension and social policy, will discourage long-term savings and represents a significant additional cost to employers or a reduction in the vast majority of pension benefits for private sector workers."
He added that the proposal impacts already hard-pressed private sector companies and ignores high net worth individuals with ARFs (approved retirement funds), public sector pensions and annuities secured with insurance companies.