Pension chiefs demand to meet Noonan
PENSION fund bosses have criticised Finance Minister Michael Noonan for refusing to meet them ahead of plans to be launched today to fund a jobs initiative by dipping into the pensions savings of private sector workers.
The Irish Association of Pension Funds has calculated that some 65,000 people receiving private pensions will end up having their annual payment cut by an average of €500 because of the proposed levy.
It said legislation would have to be introduced to allow pension payments to be reduced.
A further 700,000 workers and the unemployed, who have private sector pensions but have yet to retire, will also end up having their pension funds hit by €500 a year.
The levy will apply to defined-benefit pensions, defined-contribution pensions, personal pensions, the pensions of the self-employed and PRSAs (personal retirement savings accounts).
However, it would not apply to those who have public sector pensions.
A spokesman for the Department of Finance last night said the minister would be prepared to meet with the pension body once the jobs initiative was announced.
Pensions experts have claimed the levy being used to fund the jobs plan may actually end up costing jobs.
Ray McKenna, of consultants Towers Watson, said some companies that offered pensions would decide to absorb the levy rather than reducing members' benefits. This, however, would likely push up costs for the company.
He cited the example of a typical defined-benefit pension scheme, which might have €50m in assets covering 400 members, half of whom were retired.
The 0.5pc levy would result in the pension scheme or employer incurring an additional tax of €250,000 a year. If this was absorbed by the company it could translate into five or six jobs being lost.
Pensions consultants Mercer said the levy would jeopardise existing pension schemes.
Aisling Kennedy, of Mercer said: "It will most certainly discourage new pension savings. Why save money for your retirement if the Government can dip into your savings whenever it sees fit?"
She warned that some members of pension schemes may have their benefits reduced.
However, the Department of Finance has insisted the levy will fund the creation of new jobs. "The jobs initiative is targeted to assist those most in need in our country -- the unemployed," a spokesman said.
"The levy on pension funds will allow recipients of past tax relief to make a contribution to assist those who are now looking for jobs."