Double-whammy for Ahern, Cowen in pension pot tax
Former Taoisigh Bertie Ahern and Brian Cowen are going to get hit on the double by the tax on super pensions, bringing their pots down by €8,000 next year.
Retired politicians have been escaping the potential impact of the tax on super pensions -- until now.
A loophole in the system meant they were not being taxed on the combined value of their pensions, meaning their tax bill was lower.
Instead, their TDs' and ministers' pensions were taxed separately, despite both payments coming from the taxpayer and going to the same person.
The anomaly meant some former politicians were paying more than €3,000 less in tax on their pensions.
The first chunk of the pension is not subject to the tax. And the remainder of the pension is taxed on a rising scale.
The separation of the two pensions meant the ex-politicians were availing of the tax free allowance and lower parts of the scale on the double -- once on the TDs' pension and once on the ministers' pension.
But Public Spending Reform Minister Brendan Howlin has now changed the rules so the TDs and ministers pensions are combined for the purposes of calculating the tax. The retired politicians will be hit harder by the existing pension tax plus the additional tax.
The change means retired politicians will now get hit by a double-whammy in the new year.
In the cases of Mr Ahern and Mr Cowen, combining the two pensions will cost them €3,000 and the new 20pc tax on the amount over €100,000 will cost them €5,000.
In the wake of a public outcry over the lavish pensions paid to former politicians, the Government this week announced it will be reducing pension pots over €100,000 by another 8pc.
Since the start of the year, the plum pensions have been subject to a rising scale of cuts:
•0pc on the first €12,000.
•6pc on the next €12,000 up to €24,000.
•9pc on the next €36,000 up to €60,000.
•12pc on the rest above €60,000.
And the new cut will mean:
•20pc on any amount above €100,000.
Mr Howlin wasn't aware the TDs and ministers pensions were being treated separately and has now changed the rules.
"While working on the new measures, he instructed the relevant section in the department to apply the PSPR on an aggregate basis for former Oireachtas members and officeholders.
"Arrangements are currently being put in place to facilitate this from 1 January 2012," a spokesperson said.
The minister's officials said this change would result in retired politicians paying more of the pension tax.
"The minister has changed the application. It was being applied correctly.
"The pensions are paid from two different sources -- the Oireachtas and the Paymaster General. It will result in an increase," the spokesperson said.