Business Pensions

Tuesday 20 August 2019

Four out of ten will dump pension funding if the tax relief attacked

Charlie Weston Personal Finance Editor

HUGE numbers of people who pay into a pension would stop funding it if the Government further tampers with the tax reliefs, it has emerged.

The Government has promised the organisations bailing out the State that it plans to reap up to €900m by again reducing the tax reliefs for those who put money aside for life after work.

The fear is that the rules will be changed so workers will no longer be able to claim tax relief at 41pc, with everyone subject to relief at 20pc instead.

But now a survey conducted by the State's largest pensions provider among its customers has found that four out of 10 people would give up funding a pension or sharply cut back on their contributions if the Government lowers the tax reliefs again.

The Irish Life survey found that 85pc of its customers earn less than €70,000 a year.

Head of the company Gerry Hassett said capping the tax relief for higher earners would be preferable to paring back existing tax reliefs.

Higher rate income taxpayers can currently get tax relief at 41pc for money put into an approved pension.

Higher rate

This means a person on the higher rate can get €100 into their pension, but the tax relief means it will only cost them €59.

But pension savers were able to get more relief. Recent budgetary changes mean that taxpayers can no longer get relief for paying pay-related social insurance (PRSI).

And relief was available for those who paid the old income levy, which has since been replaced by the universal social charge.

Irish Life said capping the amount of tax relief high earners can get would generate as much for the Exchequer as cutting the tax relief rate from 41pc to 20pc.

"Clearly, we'd prefer if they left the current tax regime as it is, but it's important to stress that if change is being considered, then there are some changes that are less damaging than others," Mr Hassett told the Irish Life pensions conference yesterday.

Mr Hassett said 43pc of Irish Life customers had signalled they would cut back on pension contributions, or even cut them out altogether, if the Government reduced tax relief on pension contributions from the higher income tax rate of 41pc to the standard rate of 20pc.

"If this were the case, the impact on retirement planning in Ireland would be devastating and the burden on the State would increase to breaking point," he said.

Secretary general of the Department of Finance John Moran told the conference the State had signed up to delivering a further €900m in savings from pensions in the period up to 2012, "including a move to standard rate tax relief on pension contributions over that time".

He acknowledged that the pensions sector had made a huge contribution already to delivering savings for the Exchequer, including a levy on the assets of private sectors funds.

Irish Independent

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