Pension strategy ignores self-employed, brokers claim
Published 23/03/2010 | 05:00
THE interests of the self-employed have been completely ignored by the new National Pension Framework Strategy, the Irish Brokers Association (IBA) said yesterday.
The broker body claimed the pensions framework was a strategy to widen the current retirement gap by protecting the better provided for and by imposing further taxes on those of lesser financial standing.
IBA boss Ciaran Phelan: "At one end of the scale you have the public service pension scheme with the best benefits, best coverage and highest tax-payer subsidy -- and at the other end you have the self-employed who are forced to pay PRSI and have no unemployment benefit or contribution-related pension benefit."
He said benchmarked pension benefits were set by the public service pension scheme.
"The self-employed are in the halfpenny place and are expected to provide for the vast majority of their own pensions," Mr Phelan said.
The pensions framework was supposed to rebalance the situation, but has only served to strengthen the position of the already pension-affluent public ie state employees.
At the same time further uncertainty was heaped on those struggling to provide for their pension by Finance Minister Brian Lenihan announcement on the planned reduction in tax relief.
The minister's assertion that reducing the tax relief to 33pc is an exercise in fairness is untenable, the IBA said.
"It's an absolute fallacy that those in the 20pc tax bracket can afford to make substantial contributions towards their retirement," Mr Phelan said.
"Very few people whose incomes fall below this tax threshold have the financial capacity to put money into a pension scheme. It is our experience that the vast majority of pension contributions are made at the 41pc level, or they are not made at all.
"It must also be remembered that tax relief on pension premiums is simply tax deferral and the Government will earn 41pc-plus on income in retirement."