News Irish News

Wednesday 7 December 2016

Judges get 10 years to pay pension tax

Published 09/02/2012 | 05:00

JUDGES and other public servants with multimillion-euro pension pots have been given an extra 10 years to pay taxes on their retirement cash, it emerged last night.

  • Go To

The news follows a fierce backlash against the Government's plans to impose an immediate 41pc tax on pension pots over and above €2.3m

Senior public servants claimed that it would be impossible for them to pay the tax because of the way their pensions are structured.

They are in 'defined benefit' schemes, where they receive a lump sum on retirement and then get the rest gradually over the course of their retirement.

Public servants argued that under the original plan they could have to pay out more in immediate taxes than they would get from their lump sum pay-off.

The Government said yesterday that it noted the "particular difficulties in the context of public sector schemes" and was making "provision to mitigate the harsher impacts at retirement for certain individuals".

The public servants involved will now only to have hand over a maximum of 50pc of their lump sum for tax. The remainder can be paid off over a "maximum of 10 years".

The Government stressed that the change "does not remove the tax liability" on pensions over €2.3m but merely "provides for a more flexible recovery of tax payment".

Private sector workers in modern defined benefit schemes will remain liable for the entire payment immediately. However, it will be less onerous for them, since they can take the money directly from their pension pot and then use the remainder to buy an annuity that pays them a regular income.

Yesterday's finance bill also took pension experts by surprise by revealing that a new 6pc tax on approved retirement funds of more than €2m would apply to the entire value of the fund and not just the amount above €2m.

Taxation

"It means that you'd be better off with a €1.9m pension than a €2m one, it's bizarre," one senior industry source said last night.

Public servants most likely to be affected by the ten-year grace period include judges and senior figures from various government departments.

The issue of judges' pensions has been the source of frequent controversy since the Government admitted that it could not legally force judges to pay a pension levy imposed across the rest of the public service.

A voluntary levy was then offered -- but a third of all sitting judges declined to pay it last year. The voluntary levy has since been made compulsory in the wake of last October's referendum, which enabled the Government to make the cut.

Irish Independent

Read More

Promoted articles

Editor's Choice

Also in Irish News