Workers will lose €36,000 if pension levy not scrapped
Finance Minister Michael Noonan has been warned that it will cost workers thousands of euro if he 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.
Its the first time such a calculation has been done.
In the last Budget the Minister changed his mind and increased and extended the levy, which was originally due to go at the end of this year.
Now a new 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 by the minister on his promise to scrap it would encourage workers to move pension funds offshore.
The levy is due to reap €675m this year, with the money due to be deducted from funds this month.
Mr Gilhawley said the yield was greater than the amount of money to be collected from the property tax, and more than water charges will take in.
The controversial levy was introduced by the current Government in 2011.
It affects around 180,000 people who have defined benefit pensions, and around 240,000 who are members of defined contribution schemes.
It was originally to be imposed at 0.6pc on the value of pension funds and was to run for just four years. The Government had promised to use it to create up to 100,000 jobs.
The levy had originally been due to end this year, but in the last Budget it was increased for 2014 and will continue to be imposed at a lower level throughout next year.
The levy is 0.75pc on the value of funds this year.
If the levy is retained, but at the level of 0.15pc which it is due to be at next year, workers at retirement will lose €9,500.
If it continues indefinitely at the 0.75pc level it is at this year the average fund will lose €36,400.