Scrap plans to cut tax relief -- pensions expert
PLANS by the Government to cut tax reliefs on pensions could cost a typical middle-income earner €26,500 or more in their pension fund value at retirement, an expert has said.
Reducing the tax relief would also amount to a double taxation for those drawing down a pension, said IFG Corporate Pensions director Fionan O'Sullivan.
He called on the Government to reverse plans to cut the tax relief for investing in a pension from 41pc to 33pc.
Reducing the tax relief would kill off any saving for pensions at a time when the Government was urging people to save more to reduce the level of state dependency, Mr O'Sullivan insisted.
"Individuals paying the higher rate of income tax in retirement will effectively be subject to double taxation when they take their pension benefits," he added.
Mr O'Sullivan said the move on pensions tax relief was inconsistent with the aim of encouraging saving for retirement and contradicted the overall objective of the Government's pensions framework document.
Imposing new limits on pension tax relief would effectively reduce the impact of any contribution made by employees and lower retirement incomes in the future, Mr O'Sullivan said.
"If the Government is concerned about inequity and increasing pension coverage, they should simply increase tax relief for all to the higher rate of 41pc. This course of action would have some hope of persuading the lower paid and younger workforce into the mindset of saving," he added.
The Government has not said when it intends to cut the tax relief for higher-rate taxpayers, a move that would mean those paying tax at 20pc would end up with a higher level of tax relief.