Sunday 16 June 2019

750,000 are being hit by 'temporary' levy imposed on pensions

Finance Minister Michael Noonan
Finance Minister Michael Noonan

Charlie Weston, Personal Finance Editor

There has been renewed calls for the "temporary" levy on private pensions to be abolished.

Some 750,000 people who are members of private sector pension schemes are being impacted by the controversial levy. And it is taking in more than expected by the Government, insurance giant Standard Life said.

The levy is set to reap around €2bn from pension savers by the end of this year, Jim Connolly of Standard Life said.

This is €350m more than the Department of Finance estimated it would get from the charge.

"Given the levy's take is well in excess of its target and we are told there is room for manoeuvre in this year's Budget, now might be a good time to give back to the 'squeezed middle' and all these people who have suffered disproportionately.

"Politicians know this levy has been imposed on private sector pensions only," Mr Connolly pointed out.

He said the levy was very unfair on our customers and all pension savers affected.

Industry research indicates the levy will mean the average worker will retire with €1,000 per year less from their pension, he added. This levy was supposed to be a temporary measures and was due to finish by the end of 2014, but was increased in the last Budget from 0.6pc to 0.75pc for this year.

Minister for Finance Michael Noonan also said it would continue to be imposed at the lower rate of 0.15pc in 2015, despite promises to scrap it at the end of this year..

"The original 0.6pc levy is controversial and very unpopular with prudent savers who have done more than their share and need a break.

"It punishes responsible people who try to finance their own retirements and avoid being a burden on the state," Mr Connolly said.

He said the State can't afford to provide what is now a relatively generous state pension of up to almost €12.000 per year into the future.

"The consensus view is the real value of the state pension will decline significantly over the next decade and beyond and people will need to increasingly make provision for themselves," he added.

A recent study found it will cost workers thousands of euro if Mr Noonan again breaks his promise to scrap the levy on private pensions.

Continuing the levy at this year's level will suck €36,000 out of the average worker's retirement fund, a study commissioned by the Professional Insurance Brokers Association (PIBA) has calculated.

The study carried out by pensions expert Tony Gilhawley for PIBA has found that the levy is mainly hitting older workers and those receiving pensions.

The PIBA-commissioned study calculated that if the levy continues indefinitely at the level it is at this year the average fund will lose €36,400.

Mr Gilhawley said the levy had increased deficits in defined benefit schemes.

And another roll-back on the promise by the minister to scrap the levy would encourage workers to move funds offshore, Mr Gilhawley said.

Jerry Moriarty of the Irish Association of Pension Funds warned that older voters would punish the Government if the levy does not go after next year, as promised.

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