Judges, step out of your ivory tower and get off the pension pot!
Published 08/05/2011 | 05:00
While most of the population face poverty in retirement, the judiciary has objected that it might have to pay tax on its members' outrageous public-sector pension funds. They rightly point out that there is no fund to pay their pensions.
Then why not value their pension funds in the same way -- zilch.
The Revenue values Defined Benefit Schemes, such as these, based on 20 times the pension plus the lump-sum entitlement.
The judiciary claims that the multiple should be about nine or 10 times the value of the pension because judges only have to retire at 70.
For this reason alone their gripe is baseless. The Revenue accepts a lower valuation multiple, with prior Revenue approval.
A judge qualifies for a full pension after only 15 years. In the circumstances they have been given tax-free benefits that warrant higher tax penalties.
How can the Government expect the private sector alone to carry the burden?
Of course, some judges might have other pension funds for which they have already taken their entitlements, including tax-free cash, in the past.
The legislation they took issue with was originally introduced in 2005 for funds of more than €5m. Exceptions were made for those with larger funds.
The thing the arbitrary method of calculation does is to undervalue public sector schemes, but mainly those for senior public servants and politicians. If any category is being treated unfairly it is the private sector.
The judges are complaining about tax on money that we can't afford to pay anyway. If they are not willing to let this go now, pay them nothing.
Analysis Page 24
While some may suffer tax if they benefited from large private schemes, the Revenue rules avoid the arbitrary valuations that the judges claim.
They have also suggested that any tax charges should be at least spread over the life of the pension.
As this may be the only way to cut public spending on an elite class that claims constitutional privilege, there is no basis for any exceptional treatment.
A million people in this country who have nothing more than the State Old Age Pension to look forward to would love to be faced with these tax problems.
Meanwhile, the legislation attempts to penalise those in the private sector who paid for their pensions out of their hard- earned money. They too face the prospect of paying huge unexpected tax bills. If they have no other source from which to pay, they may have to draw more money from the fund. This will give rise to double taxation and cut their pension entitlements.
The judiciary is using its privileged positions to avoid a financial burden that the economic crisis forced on the rest of us. If this highlights anything it is that we urgently need to reform public-sector pay.
The public sector pension deficit was last calculated to be €157bn. It's time for the judiciary to step down from their ivory towers.
James Fitzsimons is a Qualified Financial Adviser