Honour pledge to scrap pension levy, Noonan told
Published 21/06/2014 | 02:30
FINANCE Minister Michael Noonan has been called on to honour a commitment to scrap the levy on private pensions which is sucking millions of euro out of retirement funds.
Research has indicated that the levy, which is due to end in 2015, will mean the average worker will retire with €1,000 less a year from their pension.
Now the Irish Association of Pension Funds (IAPF) has told Mr Noonan to keep to his word and end the levy next year.
Its call was prompted by the latest European Commission surveillance report on Ireland which calculates that the ending of the levy will cost the Exchequer €500m.
Pensions experts said they fear the need to replace so much tax revenue with new measures will mean Mr Noonan will go back on his word and retain the levy.
The controversial levy was originally due to end this year, but in the last Budget it was increased for 2014 and will continue to be imposed at a lower level throughout 2015.
Part of the justification for imposing the levy was to fund job creation measures. But head of the IAPF Jerry Moriarty claimed the levy, which has raised €1.4bn from workers' retirement savings, was unfair and there were no details on how many jobs it helped create.
"The levy was originally brought in as a temporary measure to fund the Government's jobs initiative. While unable to give much in the way of specific details, the Government claims the jobs initiative has been a success, in which case it should be self-financing at this stage.
"The levy is a very unfair tax as it takes from the retirement savings built up by private sector workers."
Mr Moriarty said the levy was a retrospective tax on capital and was not any different from taxing savings in bank accounts. He said it will reduce pensions paid in the future.
He said another €700m was due in levy payments by September of this year.
"The Minister for Finance confirmed in the Dail in May that the original levy of 0.6pc of savings would end in December as planned and we would expect him to honour that commitment," he said.
Calculations by Samantha McConnell of IFG Pensions show that someone on the average industrial wage who starts savings at 35 will end up with a pension pot of €200,000.
But the impact of the levy on all private sector schemes will mean that this person will have their pension reduced by €1,000 every year.
A spokesman for the Department of Finance said the levy is "legislated to end in 2015".