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Monday 23 October 2017

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Ireland’s Budget plans will have implications for pension funds, IAPF warns

Written by Natalie Tuck
13/10/17

Ireland’s plans to introduce a 6 per cent rate stamp duty on all commercial property transactions will have knock on implications for the value of pension funds, the Irish Association of Pension Funds has warned.

Speaking at the IAPF’s Annual Benefits Conference, in Dublin, 12 October, its chair Peter Fahy congratulated the government for the €5 increase in the state pension, which includes the contributory state pension.

However, he said the Exchequer “giveth with one hand it taketh away with the other”, and the introduction of the new 6 per cent rate of stamp duty for all commercial property transactions will have a negative effect on any pension funds with exposure to Irish commercial property.

“It is estimated that this 4 per cent increase in transaction costs will lead to an immediate 3.7 per cent decrease in the value of Irish commercial property, with obvious knock on implications for the value of our members’ pension funds,” he explained.

Talking more generally about the Irish pensions landscape, Fahy note that Ireland’s pension landscape is complex and each year brings a raft of challenges but also opportunities. “We are making progress – but with the changes and challenges coming quick and fast we may not be keeping pace.

“Now, rather than having a single defined benefit pot, and a guaranteed pension paid to them automatically, retirees now often have multiple pots in a combination of schemes and other vehicles, accumulated over their working lives. Retirement planning has become a very complex area for many scheme members – so it’s more important than ever that moves are made to ensure a simplified process overall.”

During the conference, the IAPF also reiterated their support for the introduction of an appropriate auto-enrolment system but cautioned that the system must enhance rather than detract from the existing private pensions system in which we are all participants.

“It is very important that it is introduced in a way that simplifies rather than adds additional layers of complexity to the existing system. We have existing structures in place such as well governed trust based schemes and PRSAs that can easily be used to facilitate an auto enrolment system and we would call on the Government to introduce the proposed auto enrolment system in a way which works within existing structures and promotes simplification rather than creating a new layer of complexity,” Fahy said.



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