Outrage over plan to raid workers' pensions
GOVERNMENT plans to dip into people's retirement savings to fund its new jobs initiative provoked fury yesterday.
Some 65,000 people receiving private pensions will end up having their annual payment cut by an average of €500 because of a new levy, the Irish Association of Pension Funds (IAPF) revealed.
Legislation will have to be introduced to allow pension payments to be reduced, it said.
A further 700,000 workers and the unemployed who have private sector pensions but have yet to retire will also end up having their pension funds hit for €500 a year, according to Jerry Moriarty, the IAPF's director of policy.
Mr Moriarty, whose association has been briefed on the plans by Department of Finance officials, said the levy of 0.5pc on the assets in all private schemes amounted to confiscation.
The levy will apply to defined-benefit pensions, defined-contribution pensions, personal persons, the pensions of the self-employed and PRSAs (personal retirement savings accounts).
However, it will not apply to those who have public sector pensions.
Asked about the levy yesterday, a spokesman for the Department of Finance said: "The jobs initiative is targeted to assist those most in need in our country -- the unemployed.
"The levy on pension funds will allow recipients of past tax relief to make a contribution to assist those who are now looking for jobs."
The spokesman added that public sector staff had already taken a pay cut of an average of 14pc, while public sector pension payments had gone down by an average of 4pc.
However, he did not respond to questions pointing out that the pensions levy imposed on public servants, which amounts to around 7pc, is tax-deductable.
This means that in net terms it amounts to around 3pc to 3.5pc for higher-rate taxpayers.
Mr Moriarty accused the Cabinet of introducing another "stealth tax", which ministers won't have to pay themselves.
"The current Cabinet have insulated themselves from this new stealth tax, but over 750,000 private sector workers are expected to pay this money out of their pension savings," he said.
"This as an attack on the savings of ordinary pensioners and workers, while protecting politicians and public sector workers who already have the best pension benefits."
He added that what he called a raid on private pension savings by the State would mean that people would now be less inclined to take out a pension.
The levy is set to be in place for at least four years and is expected to raise €450m a year for the State.
Mr Moriarty added that despite imposing the levy, the Government was still expected to go ahead with reducing the tax reliefs for those who put money into a pension, from 41p to 20pc for everyone.
This will mean that it will cost a higher-rate taxpayer an additional €20 for every €100 they put into a pension, compared with the current situation.
Mr Moriarty added: "There is a palpable and increasing anger amongst the Irish public at the already grossly inequitable levies and taxes being applied to ordinary workers.
"The intention that this levy might be imposed only on private-scheme pensioners and members is blatantly discriminatory."
The chief executive of Standard Life Nigel Dunne said his company was also vehemently opposed to the levy.
"It is blatantly unfair of the Government to penalise private sector savers while exempting public sector workers with extremely generous pension benefits," he said.
"It is a discriminatory raid on the increasingly poorly provisioned private sector worker. "
Mr Dunne added that a fairer alternative would be to levy all investments, including deposits.