Teachers, nurses would be 'hit hard' by pension change
Teachers, gardaí and nurses would be the big losers if there is any move to reduce the tax relief on pension contributions.
Middle-income earners in the private sector would also be hit hard, a new study from two leading pension actuaries has found.
Fears of a move to cut the tax reliefs on pensions have been sparked as a committee of civil servants, chaired by Department of Finance officials, is examining the pension tax relief situation.
Any cut in the reliefs would affect more than 600,000 workers, mainly middle-income earners.
Most of the contributions paid into pensions enjoy tax relief at the person's highest rate of tax.
Those paying income tax at 40pc get relief at that rate, but those paying tax at 20pc get lower levels of relief. A single person hits the 40pc tax rate on income as low as €34,550.
Now a report by actuaries Roma Burke and Tony Gilhawley has found reducing the tax relief for those contributing to a pension would affect the pay packets of these workers.
"It would lead to a reduction in take-home pay for this group and may have other unintended consequences such as pay demands by public sector workers or reductions in pension saving by private sector workers," the 84-page document concludes.
Worse hit would be public servants, especially those who entered the service before January 2013. This group benefits from an average contribution to their pensions of 29pc of their salary. This compares with 7pc for someone with a defined-contribution scheme in the private sector.
"More than 50pc of those claiming tax relief on pension contributions work in the public sector," said the report.
The report states that this means that any reform of the tax reliefs should take account of both public sector and private sector workers.