Controversial private sector levy ignored by pension charges report
Published 07/02/2013 | 04:00
A substantial report commissioned by the Government into charges imposed on pensions did not look at the levy on private sector pensions, it has emerged.
This is despite the fact that the levy is taking almost €500m from private schemes every year, an Oireachtas committee heard yesterday.
Pensioners have had their payments reduced to meet the demands of the annual levy, the committee was told.
The Department of Social Protection published the 286-page report into pension charges before Christmas.
It said there were serious problems with high charges imposed on pension savers by life companies and brokers.
Up to €120,000 of a €400,000 pension fund of an individual can be eaten up in charges, according to the report that was compiled with help from PricewaterhouseCoopers.
Hidden charges were a feature of pensions and there was a need for greater transparency.
But the Oireachtas Social Protection Committee was told yesterday that the impact of the Government levy is not looked at in the report on charges.
Committee chair, Labour's Joanna Tuffy, said the impact of the levy on pensions was something that was being raised with her by retired people.
Labour TD Brendan Ryan said occupational schemes were being forced to pay less out to pensioners because of the levy.
But Department of Social Protection official Patricia Murphy said it was up to scheme trustees to decide how the levy was imposed on fund members.
She added that the levy was not in the scope of the pensions charges report because it is a temporary measure.
Finance Minister Michael Noonan has promised to scrap the levy at the end of 2014. The levy is applied at a rate of 0.6pc to the market value of assets under management in private pension funds and plans.
It is due to operate for four years, with the aim of raising €470m each year.
The committee was told that up to 30pc of the value of a private pension was gobbled up in charges.
Willie O'Dea TD said retirement schemes were suffering horrendous losses.
"People are being fleeced by charges and many schemes are under water. So why should there be hidden charges?"
An auto-enrolment pension scheme for all employees may be the most effective way of ensuring that there are adequate provisions in place for low and middle-income workers upon retirement, the committee was told. The charges would be low for such a scheme.