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750,000 to benefit as pension levy scrapped over two years

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FINANCE minister Michael Noonan yielded to pressure to get rid of the controversial pensions levy.

There was wide-ranging criticism of the levy, which was described as "theft" by various groups.

The levy impacts around 750,000 people who have defined contribution, defined benefit, additional voluntary contribution and self-employed pensions.

It is applied at a rate of 0.75pc on the value of the funds this year, raising close to €700m for 2014.

The minister confirmed that it will fall back to 0.15pc next year, and promised it would go at the end of 2015.

He said the Government will honour the commitment it made in last year's Budget to reduce the levy next year, and then scrap it.

The original justification for the introduction of the levy in 2011 was to create jobs, and fund the reduction in valued added tax (VAT) in the hospitality sector.

Mr Noonan said that without the pension levy, there would have been no VAT reduction.

Head of the Irish Association of Pension Fund, Jerry Moriarty, welcomed the move.

The IAPF represents trustees private sector pension funds.

"Most pension savers will be relieved that the pensions levy will only be 0.15pc next year. While that will still take €135m from those savings, it is an improvement on the increase in the levy this year which has resulted in €700m taken from pension savings in 2014."

He said that almost €2.3bn will have been taken from pension savings since the levy began in 2011.

"The Government now needs to start to seriously address the many pensions issues to ensure people in Ireland can aspire to having pensions that are secure, fair and simple," Mr Moriarty said.

But broker body PIBA (the Professional Insurance Brokers' Association) was disappointed the levy was not scrapped altogether.

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Tax manager with KPMG tax advisers, Nicola Meaney, said the levy was a "silent tax on private sector retirement funds".

She welcomed the phasing out of the measure.

Broker body PIBA was disappointed the levy was not scrapped altogether.

Rachel Doyle of PIBA said: "While we believe it should have been dispensed with immediately, nonetheless, it will come as a relief to know that it will end once and for all at the end of next year," she said.

Tax manager with KPMG tax advisers, Nicola Meaney, said the levy was a "silent tax on private sector retirement funds". She too welcomed its phasing out.

Pensions advisers Mercer warned people putting money into their scheme that the lowering of the top rate of tax means they will get less tax relief.

This means that for those planning to make AVCs, there may be a slight tax advantage in making them before the end of the 2014 tax year.


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